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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED MAY 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 0-13281
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DIAGNON CORPORATION
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(Name of small business issuer as specified in its charter)
State of Delaware 13-3078199
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
9600 Medical Center Drive, Rockville, Maryland 20850
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(Address of principal executive office) (Zip Code)
Issuer's telephone number, including area code (301) 251-2801
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Securities registered under Section 12(b) of the Exchange Act:
Name of each exchange on
Title of class which registered
None None
- - --------------------------- ----------------------------
Securities registered under Section 12(g) of the Exchange Act:
Common Shares $.01 Par Value
------------------------------------------------------------------------
Title of Class
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months, and (2)
has been subject to such filing requirement for the past 90
days. Yes X No
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. X
---
The issuer's revenues for the fiscal year ended May 31, 1996 were $8,819,965.
The aggregate market value of voting stock held by non-affiliates, valued using
the average closing bid-and-ask prices at July 29, 1996 is $1,147,077.
Common Stock, $.01 par value per share; authorized 25,000,000 shares; 5,398,244
shares outstanding as of July 29, 1996.
Convertible Preferred Stock, $1.00 par value per share; authorized 325,000
shares; no shares outstanding as of July 29, 1996.
Documents Incorporated by Reference: Parts III and IV -Exhibits to
Registration Statement dated July 13, 1983 and Form 10-K for the fiscal years
ended May 31, 1986, 1987, 1988, 1989, 1990, 1991, 1992, 1993, 1994 and 1995.
<PAGE> 2
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Diagnon Corporation (the "Company") was founded in 1981 to develop, produce and
sell diagnostic test kits incorporating monoclonal antibodies to diagnose
certain anemias, infections, and parasitic diseases. In fiscal year 1988, the
Company discontinued the diagnostic test kit segment of its business to
concentrate on and to expand its contract research base with the National
Institutes of Health (NIH).
Beginning with fiscal year 1988, the Company has been profitable each year.
Company management, recognizing the limited number of new NIH contract
opportunities, has concentrated on maintaining its core base of long-term
contracts, competing on new opportunities when available, and concurrently
pursuing other related business elements.
In the first quarter of fiscal year 1995, the Company entered into agreements
with The Johns Hopkins University to pursue development, testing and possible
commercialization of certain cancer treatment and drug delivery approaches that
had been developed by members of the faculty of The Johns Hopkins' University
(JHU). The transaction was contingent on the obtaining of financing through a
private placement on a best efforts, non-underwritten basis by Slusser
Associates, Inc., a New York investment banking firm. The project was to be
implemented by Enhanced Therapeutics, Inc. (ET), a new company formed by
Diagnon, JHU, certain JHU faculty members, and certain other investors.
During the second quarter of fiscal year 1995, the Company announced the
termination of the agreements between Diagnon and The Johns Hopkins University.
The termination was the result of the inability to obtain financing through a
private placement within the time-frame required by the agreements. On
September 5, 1995, ET became a wholly owned subsidiary of Diagnon.
In fiscal year 1996, the Company's research and development activities in novel
forms of cancer treatment and drug delivery and purified IgG products were
assigned to the Company's Corporate Services business element and the first IgG
product, equine IgG was introduced.
CURRENT OPERATIONS
The Company is currently comprised of two subsidiaries, the above mentioned ET
and, BIOQUAL, Inc., which has two divisions, Medical Center Dr. Division and
Research Blvd. Division.
In fiscal year 1997, the BIOQUAL subsidiary is expected to generate more than
95 percent of the Company's revenues, with the remaining revenues arising from
the company's Corporate Support Services business element. As revenues grow
from sales of IgG products and other research and development activities, the
Company may transfer these products and/or contracts to the currently inactive
ET subsidiary.
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Financially and administratively, the Company's current business is divided
into three elements corresponding to the business emphases of BIOQUAL's two
divisions and the Corporate Support Services business element.
BIOQUAL MEDICAL CENTER DR. DIV. - immunological, reproductive and transgenic
studies and services with emphasis on small animal models.
BIOQUAL RESEARCH BLVD. DIV. - research and services in human disease using
nonhuman primate models.
CORPORATE SUPPORT SERVICES - purified IgG products, cancer treatment and drug
delivery.
BIOQUAL, INC.
MEDICAL CENTER DR. DIVISION
For the past twenty-one years, BIOQUAL, Inc. (through its Medical Center Dr.
Division since February 25, 1991) has operated cost-plus-fixed-fee ("CPFF")
contracts for the United States Government (the "Government") to provide
research and services in the areas of cancer, immunology, transgenics,
allophenic development, contraception and congenic animal breeding. Currently,
the Medical Center Dr. Division operates six contracts which generate more than
85% of the division's revenue:
1. Maintenance of an Animal Holding Facility and provision of
Attendant Research Services. (ends 10/31/97)
2. Facility for Preparing and Housing Virus Infected Mice,
Genetically Manipulated Mice and Chimeric Mice. (ends 9/30/97)
3. Biological Testing Facility. (Efficacy and Safety of
Reproductive Compounds) (ends 5/31/01)
4. Provide Animal Housing/Maintenance/Bleeds/Immunizations as
Specified Herein. (ends 2/20/97)
5. Development of New Methods and Strategies for Diagnosis,
Treatment and Prevention of Invasive Fungal Infection in Patients
with Cancer and HIV Infection. (ends 09/30/99)
6. Development of Transgenic Mouse Models for HIV Drug Testing.
(ends 6/27/97)
Contract revenues are charged on the basis of direct labor and supplies
provided by the Medical Center Dr. Division. Due to the relatively constant
required level of effort on the contracts, revenue is evenly spread over each
month of the year. The Government traditionally pays promptly (barring any
unforeseen circumstances such as a government shut-down). Medical Center Dr.
Division revenues totalled $4,851,581 for the most recent fiscal year.
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RESEARCH BLVD. DIVISION
For over twenty-three years, BIOQUAL, Inc.; SEMA, Inc., prior to its merger
with BIOQUAL; (through its Research Blvd. Division since February 25, 1991),
have operated CPFF and Fixed Price contracts for the Government using nonhuman
primates to provide research and services in the disease areas of cancer, AIDS,
hepatitis, cystic fibrosis and influenza. Currently, Research Blvd. operates
five contracts:
1. Studies Using Primate Models for AIDS Vaccine Research. (ends
11/27/99)
2. Facility for Animal Models Utilized for Viral Hepatitis
Experiments. (ends 12/27/99)
3. Facility for Nonhuman Primates Utilized in Infectious Disease
Research. (ends 12/30/99)
4. Mechanisms of Chemical Carcinogenesis in Old World Monkeys.
(ends 12/18/00)
5. Care and Housing of SIV Infected Research Animals. (ends
01/18/00)
As part of the predecessor contract to the second contract listed above, the
Research Blvd. Division developed and has a patent on specially designed animal
housing units under the division's animal environmental enrichment program.
Contract revenues are charged on the basis of direct labor and supplies
provided by the Research Blvd. Division. Due to the relatively constant
required level of effort on the contracts, revenue is evenly spread over each
month of the year. The Government traditionally pays promptly (barring any
unforeseen circumstances such as a government shut-down). Contract revenues
totalled $3,942,063 for the most recent fiscal year.
BIOQUAL plans to bid on renewals for both divisions' contracts as they come up
for recompetition.
The Government is the major source of funding for all of BIOQUAL's services.
All of BIOQUAL's contracts are subject to renegotiation of profits or
termination at the election of the Government. Termination of a contract or
failure to win a renewal competition adversely affects the Company's revenues
and operating capital until the vacated facility space is taken up by another
contract.
Small Business Innovative Research Program (SBIR)
Although the Company does not currently have any SBIR's, the Company continues
to compete for the Government's SBIR contract and ree grant mechanisms to
further the Company's proprietary research. The Government offers to
commercial entities "Phase I" SBIR grants which are to fund feasibility studies
costing up to $100,000 and lasting six months. If the feasibility study shows
sufficient promise, then a "Phase II" program providing grants up to $700,000
may be awarded. "Phase III" of the program consists of establishing the project
on a commercial basis. The Company regularly submits SBIR proposals and has
been awarded and has completed four Phase I grants and one Phase II grant.
Proprietary positions and/or patents arising from these programs are the
property of the Company with free licensing available to the
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Government. There can be no assurance, however, that additional SBIR grants
will be awarded, or that grants, if awarded, will result in proprietary
positions or patents for the Company.
CORPORATE SUPPORT SERVICES (CSS)
CSS has one product in the marketplace, purified equine IgG which is sold under
the brand name Lyphomune(TM). CSS is also responsible for the Company's
research and development activities, i.e.:
- additional IgG products
- cancer treatment and drug delivery
EQUINE IgG PRODUCTION
In January, 1995, the Company entered into a Licensing and Manufacturing
Agreement with ZooQuest Technologies Ltd. for an exclusive worldwide license to
manufacture and sell Equine Immunoglobulin (Lyphomune(TM) IgG) purified by a
patented process assigned to ZooQuest. Recently an agreement was reached for
the Company to acquire the assets of ZooQuest and the sale was completed in the
first quarter of fiscal year 1997.
The highly purified Equine IgG is used for treatment for Failure of Passive
Transfer (FPT) of immunity in newborn foals.
There are approximately 250,000 foals born in the United States annually. It is
estimated that 20-25% of these (about 55,000) will experience a failure of
passive transfer in some form which can be beneficially treated with Equine IgG
therapy. The European Union produces in the vicinity of 40,000 foals annually
yielding an anticipated 9,000 with FPT. Brazil presently has in the vicinity
of 6,000,000 horses yielding in the range of 150,000 new foals annually. The
remainder of North and South America have an additional 17,000,000 horses with
upwards of 400,000 foals a year. Australia and New Zealand produce in the range
of 13,000 foals a year. Treatment of a foal requires $60-$240 worth of the IgG
product. The potential United States market is estimated at $6-8,000,000
annually and the remaining world wide market at an additional $18-20,000,000.
The Company will strive to capture as large a portion of the market as
possible, however, there can be no assurance of future sales.
The United States and Europe is the first market area for Lyphomune(TM). A
distributor is presently serving the market in the U.S. Other distributors are
being contacted to add to U.S. and international coverage.
RESEARCH AND DEVELOPMENT
CANCER TREATMENT AND DRUG DELIVERY
In the second quarter of fiscal year 1996, the Company hired a molecular
biologist to evaluate technologies available from the terminated Johns Hopkins
agreements and from other sources to develop a program in therapeutics for
certain human (e.g. cancer) and animal diseases. At the end of fiscal year
1996, a novel approach to cancer treatment is under evaluation and if
preliminary studies show promise, the Company will seek support for further
development (e.g. SBIR contracts).
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Purified IgG Products
Currently the product, Lyphomune(TM), is being distributed as an oral dose. CSS
has initiated trials of an intravenous product which if successful would
provide a product with more direct entry to the bloodstream and thereby a more
efficient means for delivering the product.
Concurrently, the process for producing the oral product is being reviewed in
an effort to both increase the potency of the oral product and to lower unit
cost of production.
CSS is also working to produce purified IgG from serum from other species.
These IgG products will be clinically tested for efficacy. If these IgG
products prove efficacious and capable of being delivered at an acceptable
market price, the Company will move to production of purified IgG for other
species.
BACKLOGS
Both the BIOQUAL Medical Center Dr. and Research Blvd. divisions operate under
Government contracts which typically run three to five years. Therefore, the
backlogs of the two divisions are significantly increased in a year in which a
long-term contract is awarded. Most of the contracts included in the following
totals are incremental funded on an annual basis. Therefore much of the backlog
is not "firm" in that the funds will not be committed until a later date.
<TABLE>
<CAPTION>
Backlog
Backlog Backlog Unfilled
FY 96 FY 97 in FY 97
as of 6/1/95 as of 6/1/96 Projected
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<S> <C> <C> <C>
Med. Center Dr. Div. $ 6,191,000 $ 3,089,000 $ 1,934,000
Res. Blvd Div. 13,942,000 14,090,000 11,575,000
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TOTAL $20,133,000 $17,179,000 $13,509,000
</TABLE>
On July 1, 1996, BIOQUAL won a renewal competition and began work on the
National Institute of Child Health and Human Development contract "Biological
Testing Facility". This five year contract totals $15,015,891.
The backlog amounts for FY97 for Medical Center Dr. Division and company-wide
including the award of this contract would increase to:
<TABLE>
<CAPTION>
Backlog
Backlog Unfilled
FY 97 in FY 97
as of 7/1/96 Projected
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<S> <C> <C>
Med. Center Dr. Div. $18,105,000 $14,157,000
TOTAL $32,195,000 $25,732,000
</TABLE>
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SUPERVISION AND REGULATION
Animal Model Contracts
Over the last few decades, there has been an increasing awareness of the need
for adequate oversight and regulation of the utilization and husbandry of
animals.
BIOQUAL, Inc. utilizes animals and, by contract, is required to observe the
regulations and guidelines of the Department of Health and Human Services
Publication No. 85-23, revised 1985, Guide for the Care and Use of Laboratory
Animals. Furthermore, BIOQUAL, Inc. must meet the Public Health Service (PHS)
Policy on Humane Care and Use of Laboratory Animals. This policy mandates that
BIOQUAL, Inc. file annually an assurance as to compliance with the NIH Office
for Protection from Research Risks. BIOQUAL, Inc. also comes under the
jurisdiction of the U.S. Department of Agriculture (USDA), which regularly
inspects Research Blvd. Division and Medical Center Dr. Division facilities for
adherence to its rules and regulations regarding care and treatment of animals.
To ensure compliance with the several laws and regulations regarding animal
care, both Research Blvd. Division and Medical Center Dr. Division are
accredited as complying laboratories by the American Association for the
Accreditation of Laboratory Animal Care (AAALAC).
The supervision and regulation programs described herein are costly in terms of
ongoing operation and maintenance, but are essential because lack of compliance
can lead to cessation of operations and loss of contracts.
Environmental Compliance
The Company incurs minimal costs in the disposal of the waste generated by its
operations. These costs are reimbursable under government contracts.
Veterinary Products
The USDA is responsible for regulation of veterinary products and the Company's
product testing, approval, production and packaging are governed by Part 9 of
the Code of Federal Regulations (CFR).
Cancer Treatment Products
In the upcoming year, work on these products will not involve humans and thus
the Food and Drug Administration (FDA) will not be involved. However, the work
leading up to FDA submission will be performed under Good Laboratory Practices
(GLPs) in order to be acceptable for future presentation. Any work involving
animals will also fall under regulation by the entities described in the prior
"Animal Model Contracts" discussion.
COMPETITION
Animal Model Contracts
The Company is classified as a "small business" in Government contracting
procedures. So long as the Company continues to qualify as a "small business,"
this classification effectively limits competition for several of the Company's
current research contracts to other "small businesses" in the Washington, D.C.
area. Other barriers to competition include the general requirement of
location in the D.C. area (to serve the NIH scientists) and the high capital
costs to establish animal holding facilities.
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The Company's main "small business" competitors are Taconic Farms, BIOCON, ROW
Sciences, and Microbiological Associates.
The Company also competes on open contracts for animal research work and its
competitors at this level are Hazelton, ABL, Bionetics and universities.
Due to the specialized nature of the work and the facilities, relatively few
companies compete for contracts in small animal and nonhuman primate
applications. The Government selects winners among the competitors through
evaluation of the merit of the written technical proposals with price being an
important but not an overriding factor.
Veterinary Products
Equine IgG, the Company's product which was introduced into the market this
past fiscal year, is a purified immunoglobulin sold as a lyophilized
(freeze-dried) product. Competing products currently on the market involve the
use of unpurified equine serum/plasma maintained in a liquid or frozen state
(thawed for use). Principal suppliers of these competing alternative products
are Veterinary Dynamics, Inc. and Sera, Inc.
EMPLOYEES
At the end of fiscal year 1996, the Company employed 107 people (100 of which
were full-time) as follows: Diagnon general and administrative, 20 employees;
Research Blvd. Division, 42 employees; and Medical Center Dr. Division 45
employees. The Company expects to encounter competition for the technical
management positions necessary for the Company's business, but there is an
ample labor pool of laboratory technicians, animal caretakers,
support/maintenance personnel and the like.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's current leases are as follows:
<TABLE>
<CAPTION>
Division Location Sq. Ft. Exp. Date Options
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<S> <C> <C> <C> <C>
Diagnon Rockville, MD 6,937 5/31/01
Research Blvd. Rockville, MD 30,000 5/31/01 5 years
Medical Center Dr. Rockville, MD 51,066 3/31/99 5 years
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Annual Meeting - October 11, 1995
Election of Directors
Four directors were elected:
J. Thomas August, M.D.
Charles C. Francisco
Charles F. Gauvin
John C. Landon, Ph.D.
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There were no other directors whose term of office as a director continued
after the meeting.
Other Matters Voted Upon at the Meeting
Proposal 2 To approve the purchase by the Company of approximately
200,000 shares of the Company's stock from John C. Landon (Chairman
of the Board and CEO) at market value to fund the repayment by Dr.
Landon of the remainder of a Company loan of $90,000.
Affirmative Votes 2,558,652
Negative Votes 18,955
Abstain 1,001,602
Proposal 3 To approve the appointment of Deloitte & Touche LLP as
independent public accountants for the Company.
Affirmative Votes 3,578,349
Negative Votes 4,420
Abstain 3,740
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The approximate number of holders of record of the Registrant's Common Stock on
July 29, 1996 was 1,000. The Registrant has paid no dividends with respect to
its Common Stock during the past five years, and does not anticipate doing so
in the near future. The Company's Line-of-Credit Agreement requires that no
dividends be declared or paid until all obligations have been satisfied.
The Common Stock is traded in the over-the-counter market.
The following table sets forth, for the periods indicated, the high and low per
share closing bid prices for the Common Stock as advised to the Company by the
principal market maker in the Common Stock.
<TABLE>
<CAPTION>
Bid or Closing Quotations*
--------------------------
Fiscal Year High Low
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<S> <C> <C>
1997
1st Quarter
(thru 7/29/96) 1/4 1/4
1996
4th Quarter 1/4 1/4
3rd Quarter 9/32 1/4
2nd Quarter 5/16 3/16
1st Quarter 13/32 5/16
1995
4th Quarter 13/32 13/32
3rd Quarter 3/8 5/16
2nd Quarter 7/8 3/8
1st Quarter 3/4 1/2
</TABLE>
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*Prices are interdealer quotations and do not necessarily reflect retail
markups, markdowns or commissions, and may not necessarily represent actual
transactions.
The Company's Common Stock, $.01 par value per share, carries one vote per
share. There are no outstanding shares of preferred stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
Liquidity and Capital Resources
The Company currently has a $1,000,000 secured revolving line of credit with
First National Bank of Maryland. This line of credit is annually renewable and
the Company believes, although there is no assurance, that the line of credit
will be renewed in October, 1996. As of May 31, 1996, there were no borrowings
under this line of credit. In the opinion of the Company, total current
assets, the line of credit resources and the capital provided by future
operations will provide adequate liquidity and capital resources to maintain
operations.
The Company leases equipment under various capital leases which expire in
fiscal years 1999, 2000 and 2001. At May 31, 1996, the present value of the
minimum lease payments was $402,263.
The Company's revenues result primarily from Government CPFF and Fixed Price
contracts. Continued success in winning these contracts is essential to
maintaining liquidity and capital resources. Since the 1995 FORM 10-KSB
report, the following material contracts have been awarded to the Company:
<TABLE>
<S> <C>
1. Title: Mechanisms of Chemical Carcinogenesis in Old World
Monkeys.
Institute: National Cancer Institute
Dates Funded: 12/19/95 -12/18/00
Contract Funding: $3,266,150
2. Title: Biological Testing Facility.
Institute: National Institute of Child Health and Human
Development
Dates Funded: 7/1/96 - 6/30/01
Contract Funding: $15,015,891
</TABLE>
During this fiscal year, there were two external factors which significantly
affected the financial results of the Company: 1) the shut-down of the Federal
Government and 2) a severe snowstorm in the Washington, D.C. metropolitan area
in January 1996 ("Blizzard of '96"). The government shut-down created
operational delays within existing contracts held by the Company's subsidiary,
BIOQUAL, Inc., as well as delayed potential contract negotiations. The
shut-down also had a negative impact on the Company's ability to make timely
collections of accounts receivable on its federal contracts. The result of the
poor collections rate was increased borrowings on the Company's line of credit
and increased interest expense during the third quarter of this fiscal year.
The "Blizzard of '96" caused a decrease in the Company's direct labor base, and
consequently sales, during the third quarter as many of the Company's employees
were unable to report to work during the storm. The Company's
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sales are generated mainly from cost reimbursable contracts with direct labor
being the primary producer of sales.
In addition to the two external factors above, the expiration of two contracts
on May 31, 1995 and June 30, 1995 (representing approximately 13.4% of the
prior year sales) has had a significant impact on the Company this fiscal year.
The Company is continuing its efforts to replace the expired contracts.
Changes in Financial Position - 1996 versus 1995
Assets
In the twelve months of operation in this fiscal year, Total Assets increased
$292,415. This amount is primarily attributable to an increase in Fixed
Assets, net of Accumulated Depreciation and Amortization of $304,360,
reflecting an increase in fixed asset purchases of $574,421 (mainly nonhuman
primate enclosures and an autoclave) offset by depreciation and amortization of
$270,061 during this fiscal year. Inventories increased $52,755 as the Company
continues to produce Equine IgG. The balance of the increase is due to other
miscellaneous factors.
The increases above were partially offset by: a decrease to Accounts Receivable
of $45,196 consisting mainly of 1) a $105,801 decrease to Unbilled Accounts
Receivable resulting from a $232,973 decrease in reimbursable indirect rate
variances as a result of collections of previously unbilled variances from
prior fiscal years and a $127,171 increase in the accrual of unbilled direct
costs that were billed in the subsequent fiscal year, and 2) an increase of
$57,240 to Trade Accounts Receivable. Other Noncurrent Assets decreased
$28,677 primarily due to the net result of the completion of a nonhuman primate
housing unit order ($52,553) from the previous fiscal year and a $24,226
increase in the cash surrender value of a $1,000,000 split dollar life
insurance policy held by John C. Landon, the President, and the Company.
Liabilities
In the twelve months of operation in this fiscal year, Total Liabilities
increased $200,217. This amount is primarily due to an increase in Long-Term
Debt of $176,376 related to capital leases of $289,614 for nonhuman primate
enclosures at the Research Boulevard Facility, offset by $113,238 of payments
on capital leases, and an increase in Accounts Payable of $18,926. The balance
of the increase is due to other miscellaneous factors.
Changes in Financial Position - 1995 versus 1994
Assets
In the twelve months of operation in fiscal year 1995, Total Assets decreased
$1,117. This amount was primarily attributable to a decrease to Accounts
Receivable of $65,908 consisting of 1) an decrease of $380,609 to Trade
Accounts Receivable reflecting faster than normal collections compared to the
prior fiscal year end, 2) a $361,677 increase to Unbilled Accounts Receivable
resulting from a $356,284 increase in reimbursable indirect rate variances and
a $5,393 increase in the accrual of unbilled direct costs that were billed in
the subsequent fiscal year, and 3) Other Receivables decreased by $46,976
primarily due to the write off of the $119,000 receivable from Enhanced
Therapeutics, Inc., of which $51,078 was receivable at May 31, 1994.
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Deferred Income Taxes decreased by $181,900 primarily as a result of utilizing
a portion of the federal income tax loss carryforward during last fiscal year.
Loans to Officers decreased by $10,000 reflecting payments made by the Chief
Operating Officer to fully repay his loan from the Company. The balance of the
decrease was due to other miscellaneous factors.
The decreases above were partially offset by an increase to Cash and Cash
Equivalents of $153,581 reflecting faster than normal collections compared to
the prior year end. Prepaid Expenses increased $12,257 primarily due to a
$10,463 increase in employee salary advances. Other Noncurrent Assets
increased $90,736 primarily due to a $52,553 deposit on the fabrication of
thirteen nonhuman primate housing units and a $37,833 increase in the cash
surrender value of a $1,000,000 split dollar life insurance policy held by John
C. Landon, the President, and the Company.
Liabilities
In the twelve months of operation in fiscal year 1995, Total Liabilities
decreased $122,547. This amount was primarily due to: 1) a decrease to
Borrowings Under Line-of-Credit of $154,967, 2) a decrease in Deferred Income
of $86,579 related to the specially designed animal housing units fabricated
under the Federal Government contract "Facility for Animal Models Utilized for
Viral Hepatitis Research", and 3) a decrease in Other Accrued Liabilities of
$26,640. The balance of the decrease is due to other miscellaneous factors.
The decreases above were partially offset by an increase in Long-Term Debt of
$126,393 related to capital leases of $189,718 for nonhuman primate enclosures
at the Research Boulevard Facility and the refinancing of other existing
capital leases, offset by $75,715 of payments on capital leases, and an
increase in Accounts Payable of $29,866.
Results of Operations - 1996 versus 1995
Revenues
Contract revenues decreased by 6.8% compared to the prior year primarily due to
decreased contract activity (two contracts ended at the end of fiscal year 1995
and the first quarter of this fiscal year respectively representing
approximately 13.4% of the prior fiscal years sales). Also affecting this
fiscal year's sales is approximately $34,700 of applied indirect costs on four
contracts which caused the total incurred costs of each contract to exceed its
funding. These indirect costs are currently not available for reimbursement
and therefore revenue cannot be recognized. According to Federal Acquisition
Regulations, the Company may be able to recover all or part of these costs
after a government indirect cost audit for this fiscal year has been completed.
Operating Expenses
Contract expenses decreased 3.9% compared to the prior year primarily due to a
decrease in contract activity offset by costs incurred associated with the
production of Equine IgG which the Company began to market and sell this fiscal
year and research and development (R&D) expenses incurred related to certain
cancer treatment and drug delivery approaches. General and Administrative
Expenses (G&A) decreased 8.2% compared to the prior fiscal year. The decrease
is primarily due to the net result of a prior year $119,000 write off related
to the termination of the agreements between
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Diagnon and The Johns Hopkins University and increases in current year expenses
resulting from annual salary increases and the addition of a full-time legal
counsel. Also contributing to the decrease is a reduction of the use of
outside legal counsel as compared to the prior year. The combination of these
decreases resulted in an overall decrease in operating expenses of 4.8%.
Operating Income
Operating income decreased 56.8% compared to the prior year due to decreased
contract activity, costs incurred associated with the production of Equine IgG,
R&D expenses relating to certain cancer treatment and drug delivery approaches,
and the "Blizzard of '96" as previously discussed.
Interest Expense
For this fiscal year, Diagnon had interest expense of $49,602 compared to
$49,086 in the prior year.
Provision For Income Tax
In accordance with SFAS No. 109, "Accounting for Income Taxes", the Company
reported deferred federal income tax benefit of $2,300 for the year ended May
31, 1996. The Company provided for state income tax which is estimated at
$27,600. State income tax expense is reimbursable under government contracting
regulations.
Results of Operations - 1995 versus 1994
Revenues
Contract revenues increased by 5.1% over 1994 primarily due to increased
contract activity. Also affecting last fiscal year's sales was approximately
$83,800 of applied indirect costs on six contracts which caused the total
incurred costs of each contract to exceed its funding. These indirect costs
were not in fiscal year 1995 and are currently not available for reimbursement
and therefore revenue could not be recognized on these costs in fiscal year
1995. According to Federal Acquisition Regulations, the Company may be able to
recover all or part of these costs after a government indirect cost audit for
fiscal year 1995 has been completed.
Operating Expenses
Contract expenses increased 4.0% and General and Administrative expenses
increased 18.5% over 1994. The increases were primarily due to increased
contract activity in on-going contracts and the $119,000 write off related to
the termination of the agreements between Diagnon and The Johns Hopkins
University as previously discussed herein. The combination of these increases
resulted in an overall increase in operating expenses of 6.6%.
Operating Income
Operating income decreased 22.0% compared to 1994 due to the $119,000 write off
mentioned above and the effect of the indirect costs mentioned above, offset by
relatively higher profit margins on fixed price contracts as compared to 1994.
- 12 -
<PAGE> 14
Interest Expense
For fiscal year 1995, Diagnon had interest expense of $49,086 compared to
$34,568 in the prior year. This increase is primarily attributable to the
increased Borrowings Under Line-of-Credit and capitalized leases at a higher
interest rate.
Provision For Income Tax
In accordance with SFAS No. 109, "Accounting for Income Taxes", the Company
reported deferred federal income tax expense of $181,900 for the year ended May
31, 1995. The Company provided for state income tax which is estimated at
$23,900. State income tax expense is reimbursable under government contracting
regulations.
Inflation and Price Changes for Fiscal Year
For fiscal years 1994, 1995, and 1996 neither inflation nor price changes had
any material effect on net sales, revenues, or income from operations.
ITEM 7. FINANCIAL STATEMENTS
Financial statements are listed in the Table of Contents on page 27 as
Financial Statements filed as part of this FORM 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Set forth below is information with respect to the present directors, and
executive officers.
<TABLE>
<CAPTION>
NAME DIRECTOR SINCE AGE POSITIONS
- - ---- -------------- --- ---------
<S> <C> <C> <C>
John C. Landon, Ph.D. 1986 59 Chairman of the Board;
President & Chief
Executive Officer; Director
J. Thomas August, M.D. 1982 69 Consultant; Scientific
Advisor; Director
Charles C. Francisco 1991 58 Director; Member of Compensation
Committee; Member of Audit
Committee
Charles F. Gauvin 1992 40 Director; Member of Compensation
Committee; Member of Audit
Committee
Michael P. O'Flaherty 58 Secretary; Chief Operating
Officer
</TABLE>
- 13 -
<PAGE> 15
<TABLE>
<S> <C> <C>
David A. Newcomer 35 Chief Financial Officer
Leanne DeNenno 42 Vice President, BIOQUAL, Inc.
(Subsidiary)
Richard P. Bradbury, DVM 61 Vice President, BIOQUAL, Inc.
(Subsidiary)
Jerry R. Reel, Ph.D. 58 Vice President, BIOQUAL, Inc.
(Subsidiary)
</TABLE>
Each director is elected to hold office until the next annual meeting of
stockholders and until his successor is elected and qualified. Officers serve
at the discretion of the Board of Directors.
Dr. John C. Landon was elected President and Chief Executive Officer of the
Company in May, 1986 and has been Chairman of the Board since February, 1987.
Dr. Landon has been President of BIOQUAL, Inc. from January 1982 to the
present. Dr. Landon is also the President, Chief Executive Officer, Treasurer
and a Director of the Company's subsidiaries. Dr. Landon's experience includes
positions with the National Cancer Institute and with Litton Industries as
Scientific Director of the Frederick Cancer Research Facility and as President
of EG&G Mason Research Institute.
Dr. J. Thomas August is a consultant to the Company, a principal stockholder
and a founder of the Company, as well as a Director. He is Professor and
Director of the Department of Pharmacology and Molecular Sciences at the Johns
Hopkins University School of Medicine, Baltimore, Maryland and has served in
those positions since 1976. Dr. August is a Scientific Founder of Enhanced
Therapeutics, Inc. Dr. August's previous experience includes positions as
Director of the Division of Biological Sciences and Chairman of the Department
of Molecular Biology at the Albert Einstein College of Medicine. He has also
held posts as a Research Fellow in Medicine at Harvard Medical School, as an
Instructor and Assistant Professor of Medicine at Stanford University School of
Medicine, and as an Associate Professor in Medicine (assigned to microbiology)
at the New York University School of Medicine.
Mr. Charles C. Francisco is President, CEO and a Director of Victoreen, Inc., a
manufacturer of radiation measuring instrumentation, located in Cleveland,
Ohio. From 1992 to 1995, he was a director of R. E. Wright & Associates, Inc.
and Environmental Restoration Systems, Inc., earth resources consultants and
pollution removal equipment makers, respectively. From 1996 to present, he is a
director of R.E. Wright Environmental, Inc., an SAIC company and successor to
R.E. Wright & Associates, Inc. From June 1991 to June 1992, he was President
and Director of AMC Group, Inc., a private investment holding company. From
1987 to 1991 (June), he was President and a Director of Hypres, Inc., a startup
company in superconducting technology.
Mr. Charles F. Gauvin is the President and CEO of Trout Unlimited, a non-profit
organization dedicated to protection and conservation of trout and salmon and
their habitats, located in Arlington, Virginia. From 1986 - 1991, he was
associated with the law firm of Beveridge & Diamond, P.C. in Washington, D.C.,
where his practice included corporate and securities work for the Company.
Mr. Michael P. O'Flaherty joined the Company in June 1986, as a Vice President
of the Company's former SEMA subsidiary. In July 1986 he was
- 14 -
<PAGE> 16
appointed Vice President of BIOQUAL. In June 1988 he was appointed Corporate
Vice President and Secretary of the Company. In September 1989 he was
appointed Executive Vice President of the Company. In June 1994 he was
appointed Chief Operating Officer of the Company. Mr. O'Flaherty's duties for
the Company include most functions of general management.
Mr. David A. Newcomer joined the Company in May, 1989 as the Acting Controller
of the Company. In June 1990 he was appointed Controller of Diagnon and
BIOQUAL. In June 1994 he was appointed Chief Financial Officer of the Company.
Mr. Newcomer's duties include managing the Company's financial functions.
Ms. Leanne DeNenno has been an employee of Diagnon's subsidiary, BIOQUAL, Inc.,
since its inception in 1982. From that date to the present, she has been a
Project Manager on a major National Cancer Institute contract. In 1988, she
was named head of Animal Research Programs for BIOQUAL, Inc. and in 1991, she
was named Vice President in charge of the Medical Center Dr. Division of
BIOQUAL, Inc.
Dr. Richard P. Bradbury, D.V.M., an American College of Laboratory Animal
Medicine Diplomate, joined the Company in 1989 as the Vice President of the
Company's subsidiary, SEMA, Inc. Since the 1991 merger of SEMA into BIOQUAL,
Dr. Bradbury has been the Vice President of BIOQUAL in charge of the Research
Blvd. Division.
Dr. Jerry R. Reel, Ph.D., an American Board of Toxicology Diplomate, joined the
Company in 1991 as Vice President, Science for BIOQUAL. Prior to joining
BIOQUAL, Dr. Reel had his own consulting company.
- 15 -
<PAGE> 17
Item 10. EXECUTIVE COMPENSATION
The following table sets forth information with respect to remuneration paid
during the last three fiscal years to the Chief Executive Officer of the
Company and other company officers whose compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
--------------------------------
Annual Compensation Awards Payouts
- - --------------------------------------------------------------------------------------------------------------------------------
Other
Annual Restricted All Other
Compen- Stock Options/ LTIP Compen-
Name and Principal Salary Bonus sation Awards SARs Payouts sation
Position Year ($) ($) ($) (1,2) ($) (#) ($) ($)
- - --------------------------------- ------- --------- --------- --------- --------- ------ ------- ---------
<S> <C> <C> <C> <C>
John C. Landon 1996 160,000 116,946 32,723
----
CEO, President, Chairman 1995 160,000 139,963 32,723
----
of the Board 1994 154,400 149,773 32,723
----
Michael P. O'Flaherty 1996 120,818 11,944 10,593
----
Chief Operating Officer, 1995 108,675 17,115 8,827
----
Secretary 1994 99,000 15,085
----
Jerry R. Reel 1996 109,481 2,949
----
Vice President, Bioqual, Inc. 1995 110,636 3,405
----
(Subsidiary) 1994 97,641 655
----
Richard P. Bradbury 1996 99,205 3,102
----
Vice President, Bioqual, Inc. 1995 91,504 1,160
----
(Subsidiary) 1994 90,855 480
----
</TABLE>
- - ---------------------
(1) Other Annual Compensation for the CEO for the years 1996, 1995 and
1994 represents premiums for a $1,000,000 Split Dollar Life Insurance
Policy.
(2) Other Annual Compensation for the Chief Operating Officer for the
years 1996 and 1995 represents premiums for a $250,000 Split Dollar
Life Insurance Policy.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of % of Total
Securities Stock Options
Underlying Granted to
Stock Options Employees in Exercise Expiration
Name Granted (#) Fiscal Year Price ($/Sh) Date
- - ------------------------ -------------- --------------- ------------ ----------
<S> <C> <C> <C> <C>
Michael P. O'Flaherty 10,000(1) 25.0% $ .5625 6/05/05
Chief Operating Officer
Jerry R. Reel 4,000(1) 10.0% $ .5625 6/05/05
Vice President, Subsidiary
Richard P. Bradbury 4,000(1) 10.0% $ .5625 6/05/05
Vice President, Subsidiary
</TABLE>
- - -----------------
(1) All options reported in this table are fully exercisable.
-16-
<PAGE> 18
AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR, AND FY-END OPTION VALUE
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Shares Options Options
Acquired Value at FY-End (#) at FY-End ($)
on Exercise Realized
Name (#) ($) Exercisable Exercisable
- - -------------------------- ----------- -------- ------------- -------------
<S> <C> <C>
John C. Landon 150,000 (1,2) N/A
CEO, President,
Chairman of the Board
Michael P. O'Flaherty 85,000 (1) 7,456
Chief Operating Officer, 10,000 (1,2) N/A
Secretary
Jerry R. Reel 3,000 (1) 131
Vice President, Subsidiary 4,000 (1) N/A
Richard P. Bradbury 7,000 (1) 1,407
Vice President, Subsidiary 4,000 (1) N/A
</TABLE>
- - -----------------
(1) All options reported in the table are fully exercisable.
(2) All options are out-of-the-money.
Compensation of Directors
During fiscal year 1996, the Company paid to Directors:
<TABLE>
<CAPTION>
Attendance of
Board Meetings Travel to
Directors and Consultation Board Meetings
Fees ($) Fees ($) Expenses ($)
------------ ---------------- --------------
<S> <C> <C> <C>
Dr. J. Thomas August 4,000 10,900 0
Charles C. Francisco 4,000 1,000 924
Charles F. Gauvin 4,000 1,000 0
</TABLE>
- 17 -
<PAGE> 19
Messrs. Francisco, August and Gauvin have agreements with the Company extending
through the term of their election. The agreements for Messrs. Francisco,
August and Gauvin provide for quarterly payments of $1,000 each as directors
fees and payments of $500 each for attendance of Board of Director meetings.
The agreement for Mr. August also provides payments of $1,000 per day for
services rendered to the Company as Scientific Adviser. The Company also
reimburses Company related travel expenses incurred by any of the directors.
Employment Contracts
Dr. Landon had an employment agreement with the Company which expired May 31,
1996, subsequently, the Board of Directors extended the agreement until May 31,
1997 at the same terms and conditions. Pursuant to this agreement, Dr.
Landon's base compensation is $160,000 per year. The agreement provides for
various additional incentive compensation dependent upon the results of the
Company's operations each year through the term of employment. On April 30,
1993, Dr. Landon requested and received board of director concurrence to reduce
his base salary for fiscal year 1994 by 3.5% to assist the Company in its
efforts to contain operating costs. On June 1, 1994, Dr. Landon's base
compensation returned to $160,000 per year.
COMPENSATION PURSUANT TO PLANS
Stock Option Plan - The Company adopted a Stock Option Plan (the "Plan") in
November 1988 which permits the granting of options to all employees to
purchase up to an aggregate of 500,000 shares of Common Stock. The Plan is
designed to qualify as an "incentive stock option plan" under Section 422A of
the Internal Revenue Code, but also permits the Company to grant non- qualified
options to persons, such as consultants and outside directors. Under the Plan,
options to purchase shares of Common Stock are granted at not less than 100% of
the fair market value of the underlying shares on the date granted. The Plan
is administered by a committee of the Board of Directors, which has the
authority to select optionees, evaluate suggestions presented by the Company in
order to determine the number of options to be granted to the selected
optionees, designate the number of shares to be covered by each option and,
subject to certain restrictions, specify other terms of the options. During
fiscal year 1996, the committee was comprised of Messrs. Gauvin and Francisco.
- 18 -
<PAGE> 20
As of May 31, 1996, the following options to the officers and directors were
outstanding:
<TABLE>
<CAPTION>
Percentage Option Date
Name Service Shares of Total Price Granted
---- ------- ------ ---------- ------ -------
<S> <C> <C> <C> <C> <C>
John C. Landon CEO, President,
Director, 150,000 43.6% $ .4469 1/19/94
Chairman
Michael P. O'Flaherty Chief Operating
Officer, 45,000 13.1% $ .3125 12/30/88
Secretary 20,000 5.8% $ .25 10/26/89
15,000 4.3% $ .08 2/8/90
5,000 1.4% $ .30 8/14/92
10,000 2.9% $ .5625 6/5/95
Richard Bradbury Vice President, 5,000 1.4% $ .08 2/8/90
BIOQUAL 2,000 .6% $ .30 8/14/92
4,000 1.2% $ .5625 6/5/95
Leanne DeNenno Vice President, 5,000 1.4% $ .08 2/8/90
BIOQUAL 2,000 .6% $ .30 8/14/92
4,000 1.2% $ .5625 6/5/95
Jerry Reel Vice President, 3,000 .8% $ .30 8/14/92
BIOQUAL 4,000 1.2% $ .5625 6/5/95
David A. Newcomer Chief Financial 4,000 1.2% $ .08 2/8/90
Officer 2,000 .6% $ .30 8/14/92
4,000 1.2% $ .5625 6/5/95
Charles C. Francisco Director 10,000 2.9% $ .09 8/14/92
Charles F. Gauvin Director 10,000 2.9% $ .30 8/14/92
All officers and
directors as a group 304,000 88.4% $ .08 to 12/30/88 to
(8 persons) $ .5625 6/5/95
</TABLE>
A total of 344,000 options are granted and outstanding at May 31, 1996. No
options have been exercised to date, however all options are exercisable. Of
the options granted, 334,000 are from the 1988 Stock Option Plan (described
herein) which was established for a ten year period beginning November 17,
1988. Options to purchase 10,000 shares of common stock were granted outside
the plan.
The options granted from the 1988 Plan are effective for a ten year period from
the date of grant, with the exception of John C. Landon whose option for
150,000 shares expires January 19, 1999.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security ownership of certain beneficial owners
The following table sets forth information as of July 29, 1996, with respect to
the stock ownership of all holders of 5% or more of the Company's Common Stock.
<TABLE>
<CAPTION>
Name and Address Number of Shares Percentage (1)
- - ---------------- ---------------- --------------
<S> <C> <C>
Dr. John C. Landon
8213 Raymond Lane
Potomac, MD 20854 1,208,092 (2),(3) 21.7
S. David Leibowitt
2295 South Ocean Blvd.
Palm Beach, FL 33480 598,840 (4) 11.1
Dr. J. Thomas August
905 Poplar Hill Road
Baltimore, MD 21210 1,022,140 (5) 18.9
</TABLE>
- 19 -
<PAGE> 21
<TABLE>
<S> <C> <C>
Carole Knieter Bishop
100 W. 57th Street
New York, New York 10019 363,040 6.7
</TABLE>
(1) Assumes the exercise by such person or persons of the
currently exercisable options and does not give effect to any
shares issuable upon exercise by any other person or persons
of options.
(2) Includes 54,330 shares in the names of members of Dr. Landon's
family.
(3) Assumes the exercise of currently exercisable options to
purchase 160,000 shares.
(4) Includes 30,000 shares in the name of S. David Leibowitt's
spouse.
(5) Assumes the exercise of currently exercisable options to
purchase 10,000 shares.
Security ownership of management
The following table sets forth information as of July 29, 1996, with respect to
the stock ownership of all: directors; executive officers included in the
Summary Compensation Table on page 15; directors and officers as a group, of
the Company's Common Stock.
<TABLE>
<CAPTION>
Name and Address Number of Shares Percentage (1)
- - ---------------- ---------------- --------------
<S> <C> <C>
Dr. John C. Landon
8213 Raymond Lane
Potomac, MD 20854 1,208,092 (2),(3) 21.7
Charles C. Francisco
25 Ridge Creek Trail
Moreland Hills, OH 44022 20,000 (4) .3
Dr. J. Thomas August
905 Poplar Hill Road
Baltimore, MD 21210 1,022,140 (5) 18.9
Charles F. Gauvin
4100 Hamilton Street
Hyattsville, MD 20781 20,000 (6) .3
Michael P. O'Flaherty
1213 Bradfield Drive
Leesburg, VA 22075 99,000 (7) 1.8
Dr. Jerry R. Reel
933 Hillside Lake Terrace
Gaithersburg, MD 20878 7,000 (8) .1
Dr. Richard P. Bradbury
16708 Briardale Road
Rockville, MD 20855 11,000 (9) .2
</TABLE>
- 20 -
<PAGE> 22
<TABLE>
<S> <C> <C>
All executive officers
and directors (7, of
whom all beneficially
own shares) as group 2,387,232 (10) 41.7
</TABLE>
(1) Assumes the exercise by such person or persons of the
currently exercisable options owned by him or them and does
not give effect to any shares issuable upon exercise by any
other person or persons of options.
(2) Includes 54,330 shares in the names of members of Dr. Landon's
family, as to which he retains beneficial ownership.
(3) Assumes the exercise of currently exercisable options to
purchase 160,000 shares.
(4) Assumes the exercise of currently exercisable options to
purchase 20,000 shares.
(5) Assumes the exercise of currently exercisable options to
purchase 10,000 shares.
(6) Assumes the exercise of currently exercisable options to
purchase 20,000 shares.
(7) Assumes the exercise of currently exercisable options to
purchase 95,000 shares.
(8) Assumes the exercise of currently exercisable options to
purchase 7,000 shares
(9) Assumes the exercise of currently exercisable options to
purchase 11,000 shares.
(10) See Notes (2) through (9) above.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 1, 1988 the Company and Dr. Landon agreed to consolidate the previous
loan facilities available to Dr. Landon into a single loan of $100,000. The
loan had a five year term with repayment of principal deferred for three years.
The loan bears interest at the six month certificate of deposit rate paid by
Signet Bank, Maryland and the rate is adjusted quarterly. On September 29,
1989 the Company agreed to increase the loan to $125,000. On September 21,
1990, the Company agreed to increase the loan to $150,000. Pursuant to Dr.
Landon's current employment agreement, the loan is to be repaid in five
installments of $30,000 plus interest within six weeks after the end of each of
the next five fiscal years beginning with fiscal year 1992.
The largest amount owed by Dr. Landon during the fiscal year ended May 31, 1996
in respect to his loan facilities was $90,000, excluding interest accrued
amounting to $8,955. There was no addition to the loan during this fiscal
year. On July 1, 1994, Dr. Landon made a payment of $2,745 on accrued
interest. On June 6, 1994, the Company agreed to defer Dr. Landon's third
$30,000 repayment and make the payment due as two $15,000 installments paid
with the fourth and fifth $30,000 repayments respectively. On October 11,
1995, the Company's shareholders affirmatively voted to approve the purchase
- 21 -
<PAGE> 23
of Company stock from Dr. Landon at market value to fund the repayment by Dr.
Landon of the remainder of the Company loan. As of July 29, 1996, neither the
stock purchase or the loan repayment transaction has occurred.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Table of Contents to Financial Statements, on page 28.
(b) The Registrant filed no reports on FORM 8-K during the final
quarter of its fiscal year ended May 31, 1996.
(c) Exhibits filed (Exhibits incorporated by reference listed
separately.)
(10) Government Contracts.
<TABLE>
<S> <C>
1. Title: Biological Testing
Facility.
Institute: National Institute of Child Health and Human
Development
Dates Funded: 7/1/96 - 6/30/01
</TABLE>
(21) List of Subsidiaries
Exhibits incorporated by reference to the Company's FORM 10-KSB
for the fiscal year ended May 31, 1996 (filed with the
Company's FORM 10-QSB for the quarter ended November 30, 1995).
(10) Government Contracts.
<TABLE>
<C> <C>
1. Title: MAO/Evaluation of AIDS Vaccines in Non-Human Primates.
Institute: National Institute of Allergy and Infectious Diseases
Dates Funded: 9/30/95 - 11/15/97
2. Title: Mechanisms of Chemical Carcinogenesis in Old World Monkeys.
Institute: National Cancer Institute
Dates Funded: 12/19/95 - 12/18/00
</TABLE>
Exhibits incorporated by reference to the Company's
Registration Statement No. 2-83803.
(3) (a) Amended and Restated Certificate of
Incorporation.
(b) By-laws.
(4) Stock certificate representing shares of Common Stock.
- 22 -
<PAGE> 24
Exhibits incorporated by reference to the Company's FORM
10-K for the fiscal year ended May 31, 1986.
(3) Amendment dated April 15, 1986 to Certificate of
incorporation.
(10) (a) Agreement of Sale dated February 28,
1986 between Meloy Laboratories, Inc. and
SEMA, Inc.
(b) Stock Purchase Agreement dated May 30,
1986 between BIOQUAL, Inc. and Diagnon
Corporation.
Exhibits incorporated by reference to the Company's FORM
10-K for the fiscal year ended May 31, 1988.
(10) Government Contracts.
<TABLE>
<S> <C>
1. Title: Maintenance of an Animal
Holding Facility and Provision
of Attendant Research Services
Institute: National Cancer Institute
Dates Funded: 11/1/87 - 10/31/93
</TABLE>
Exhibits incorporated by reference to the Company's FORM
10-K for the fiscal year ended May 31, 1989.
(3) Amendments dated April 7, 1989 to
Certificate of Incorporation.
(10) (a) The Company's 1988 Stock Option Plan,
adopted November 17, 1988.
(b) Government Contracts.
<TABLE>
<S> <C>
1. Title: Facility for Preparing and Housing Virus Infected and
Genetically Manipulated Mice, and Chimeric Mice.
Institute: National Cancer Institute
Dates Funded: 9/30/88 - 9/29/93
2. Title: Comprehensive Animal Care.
Institute: National Institute on Alcohol Abuse and Alcoholism
Dates Funded: 6/30/89 - 6/29/92
</TABLE>
Exhibits incorporated by reference to the Company's FORM
10-K for the fiscal year ended May 31, 1990.
(10) Government Contracts.
<TABLE>
<S> <C>
1. Title: Facility for Animal Models Utilized
for Viral Hepatitis Research
Institute: National Institute of Allergy
and Infectious Diseases
Dates Funded: 12/28/89 - 12/27/94
</TABLE>
- 23 -
<PAGE> 25
<TABLE>
<S> <C>
2. Title: Care and Housing of AIDS Research
Animals
Institute: National Institute of Allergy and
Infectious Diseases
Dates Funded: 1/1/90 - 1/18/95
3. Title: Facility for Nonhuman Primates Utilized
in Infectious Disease Research
Institute: National Institute of Allergy
and Infectious Diseases
Dates Funded: 1/1/90 - 12/30/94
4. Title: Mouse Breeding Facility
Institute: National Institutes of Allergy
and Infectious Diseases
Dates Funded: 1/1/90 - 5/31/95
</TABLE>
Exhibits incorporated by reference to the Company's FORM
10-K for the fiscal year ended May 31, 1991.
(10) Government Contracts.
<TABLE>
<S> <C>
l. Title: SIV Rhesus Macaque Model for Pediatric AIDS
Institute: National Institute of Mental Health
Dates Funded: 11/7/90 - 6/30/95
2. Title: Test the Immune Response of Viral
Antigens in Subhuman Primates
Institute: National Cancer Institute
Dates Funded: 11/30/90 - 11/29/94
3. Title: Transplacental Carcinogenesis and
Tumor Promotion in Old World Monkeys
Institute: National Cancer Institute
Dates Funded: 12/19/90 - 12/18/95
4. Title: Biological Testing Facility
Institute: National Institute of Child Health and
Human Development
Dates Funded: 6/1/91 - 5/31/96
</TABLE>
Exhibits incorporated by reference to the Company's FORM
10-K for the fiscal year ended May 31, 1992.
(10) (a) Government Contracts.
<TABLE>
<S> <C>
1. Title: Facility for Gene Transfer Therapy
via Adenovirus in Nonhuman Primates
Institute: National Heart, Lung, and Blood
Institute
Dates Funded: 3/31/92 - 10/15/93
</TABLE>
(b) Leases.
1. Medical Center Drive Facility
2. Research Boulevard Facility
- 24 -
<PAGE> 26
(c) Employment Agreement dated January 23, 1991
between John C. Landon and Diagnon Corporation.
Exhibits incorporated by reference to the Company's FORM
10-KSB for the fiscal year ended May 31, 1994.
(10) Government Contracts.
<TABLE>
<S> <C>
1. Title: Facility for Preparing and Housing Virus Infected Mice, Genetically Manipulated
Mice, and Chimeric Mice.
Institute: National Cancer Institute
Dates Funded: 10/1/93 - 9/30/97
2. Title: Maintenance of an Animal Holding and Breeding Facility and Provision of Attendant
Research Services.
Institute: National Cancer Institute
Dates Funded: 11/1/93 - 10/31/97
3. Title: Provide Animal Housing / Maintenance / Bleeds / Immunizations as Specified Herein.
Institute: National Institute of Diabetes and Digestive and Kidney Diseases
Dates Funded: 2/21/92 - 2/20/97
4. Title: Provide, Maintenance and Transfer of Tumor Bearing Laboratory Animal Models for
Investigation.
Institute: National Cancer Institute
Dates Funded: 9/30/89 - 9/30/94
5. Title: Development of Transgenic Mouse Models for HIV Drug Testing
Institute: National Institute of Dental Research
Dates Funded: 6/28/94 - 6/27/97
</TABLE>
Exhibits incorporated by reference to the Company's FORM
10-KSB for the fiscal year ended May 31, 1995 (filed
with the Company's FORM 10-QSB's during the fiscal year
ended May 31, 1995).
(10) (a) Option and Pre-Incorporation Agreement
dated March 25, 1994 between Johns
Hopkins University, Diagnon Corporation,
and Slusser Associates, Inc.
(b) First Amendment to Option and
Pre-Incorporation Agreement dated June 8,
1994.
(c) Second Amendment to Option and
Pre-Incorporatation Agreement dated June
29, 1994.
(d) Service Agreement dated July 1, 1994
between Enhanced Therapeutics, Inc. and
Diagnon Corporation.
- 25 -
<PAGE> 27
(e) Stockholders' Agreement of Enhanced
Therapeutics, Inc. dated July 1, 1994.
(f) Licensing and Manufacturing Agreement
dated January 12, 1995 between ZooQuest
Technologies Ltd., Inc., Equilab
Associates, Inc., and Diagnon Corporation.
(g) Government Contracts.
<TABLE>
<S> <C> <C>
1. Title: Care and Housing of Research Animals for Hepatitis Studies.
Institute: National Institute of Allergy and Infectious Diseases
Dates Funded: 12/28/94 - 12/27/99
2. Title: Facility for Non-Human Primates Utilized in Infectious Disease Research.
Institute: National Institute of Allergy and Infectious Diseases
Dates Funded: 12/31/94 - 12/30/99
3. Title: Care and Housing of SIV Infected Research Animals.
Institute: National Institute of Allergy and Infectious Diseases
Dates Funded: 1/19/95 - 1/18/00
4. Title: Development of New Methods and Strategies for Diagnosis, Treatment, and
Prevention of Invasive Fungal Infection in Patients with Cancer and HIV
Infection.
Institute: National Cancer Institute
Dates Funded: 10/1/94 - 9/30/99
5. Title: Studies Using Primate Models for AIDS Vaccine Research.
Institute: National Cancer Institute
Dates Funded: 11/30/94 - 11/29/98
</TABLE>
- 26 -
<PAGE> 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned thereunto duly authorized on August 28, 1995.
DIAGNON CORPORATION
/s/ John C. Landon
---------------------------------
BY: John C. Landon
Chairman of the Board
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- - --------- ----- ----
<S> <C> <C>
Chairman of the
Board, President and
Director (Chief Executive
/s/ John C. Landon Officer) 8/28/96
- - ------------------
John C. Landon, Ph.D.
/s/ J. Thomas August Director 8/28/96
- - --------------------
J. Thomas August M.D.
/s/ Charles C. Francisco Director 8/28/96
- - ------------------------
Charles C. Francisco
/s/ Charles F. Gauvin Director 8/28/96
- - ---------------------
Charles F. Gauvin
/s/ Michael P. O'Flaherty Chief Operating Officer 8/28/96
- - ------------------------- and Secretary
Michael P. O'Flaherty
/s/ David A. Newcomer Chief Financial Officer 8/28/96
- - ---------------------
David A. Newcomer
</TABLE>
- 27 -
<PAGE> 29
DIAGNON CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Financial Statements:
Consolidated Balance Sheets, May 31, 1996 and 1995 . . . . . . . . . . . . . . 30
Statements of Consolidated Operations for each of the
years in the three year period ended May 31, 1996 . . . . . . . . . . . . . . 31
Statements of Consolidated Cash Flows for each of the years
in the three year period ended May 31, 1996 . . . . . . . . . . . . . . . . . 32
Statements of Consolidated Stockholders' Equity for each
of the years in the three year period ended May 31, 1996 . . . . . . . . . . . 33
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
Other financial statement schedules are omitted because they are not applicable
or required.
- 28 -
<PAGE> 30
[DELOITTE & TOUCHE LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Diagnon Corporation:
We have audited the accompanying consolidated balance sheets of Diagnon
Corporation and Subsidiaries as of May 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three year period ended May 31, 1996. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Diagnon Corporation and
Subsidiaries at May 31, 1996 and 1995, and the results of their operations and
their cash flows for each of the years in the three year period ended May 31,
1996 in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
July 26, 1996
- 29 -
<PAGE> 31
DIAGNON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, MAY 31, 1995 AND MAY 31, 1996
<TABLE>
<CAPTION>
ASSETS 1996 1995
- - ------ -------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 218,543 $ 210,887
Accounts receivable:
Trade 930,598 873,358
Unbilled 622,245 728,046
Other 27,425 24,060
Prepaid expenses 71,432 70,513
Inventories 52,755
Deferred income taxes-current 49,000 43,800
-------------- --------------
Total current assets 1,971,998 1,950,664
-------------- --------------
LOANS TO OFFICERS 90,000 90,000
-------------- --------------
FIXED ASSETS:
Leasehold improvements 543,735 532,379
Furniture, fixtures and equipment 2,647,531 2,084,466
-------------- --------------
Total 3,191,266 2,616,845
Less accumulated depreciation
and amortization 1,920,873 1,650,812
-------------- --------------
Fixed assets, net 1,270,393 966,033
-------------- --------------
DEFERRED INCOME TAXES-NONCURRENT 796,500 799,400
-------------- --------------
OTHER NONCURRENT ASSETS 102,093 130,770
-------------- --------------
GOODWILL, NET OF ACCUMULATED
AMORTIZATION OF $11,350 IN 1996
AND $9,648 IN 1995 1,702
-------------- --------------
TOTAL $ 4,230,984 $ 3,938,569
============== ==============
LIABILITIES
CURRENT LIABILITIES:
Current maturities of long-term debt $ 113,918 $ 83,075
Accounts payable 234,270 215,344
Accrued compensation and related costs 275,794 276,247
Accrued income taxes 3,560 302
cther accrued liabilities 11,503 9,393
-------------- --------------
Total current liabilities 639,045 584,361
LONG-TERM DEBT 288,345 142,812
-------------- --------------
Total liabilities 927,390 727,173
-------------- --------------
STOCKHOLDERS' EQUITY
- - --------------------
Convertible preferred stock - par value of
$1.00 per share, 325,000 shares authorized;
no shares issued and outstanding
Common stock - par value of $.01 per share;
25,000,000 shares authorized; 9,602,452
shares issued; 5,398,244 shares outstanding 96,024 96,024
Additional paid-in capital 7,395,015 7,395,015
Accumulated deficit (3,560,088) (3,652,286)
-------------- --------------
Total 3,930,951 3,838,753
Less - treasury stock 4,204,208 shares, at cost (627,357) (627,357)
-------------- --------------
Tctal stockholders' equity 3,303,594 3,211,396
-------------- --------------
TOTAL $ 4,230,984 $ 3,938,569
============== ==============
</TABLE>
See notes to financial statements.
-30-
<PAGE> 32
DIAGNON CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS FOR EACH OF THE YEARS
IN THE THREE YEAR PERIOD ENDED MAY 31, 1996
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- --------------
<S> <C> <C> <C>
CONTRACT REVENUES $ 8,819,965 $ 9,461,059 $ 9,004,817
OPERATING EXPENSES:
Contract 7,019,708 7,307,029 7,027,113
General and administrative 1,642,875 1,789,357 1,510,022
------------- -------------- -------------
Total 8,662,583 9,096,386 8,537,135
------------- -------------- -------------
OPERATING INCOME 157,382 364,673 467,682
INTEREST INCOME 9,718 7,743 11,368
INTEREST EXPENSE (49,602) (49,086) (34,568)
------------- -------------- -------------
INCOME BEFORE INCOME TAX 117,498 323,330 444,482
PROVISION FOR INCOME TAX (25,300) (201,900) (76,300)
------------- -------------- -------------
NET INCOME $ 92,198 $ 121,430 $ 368,182
============= ============== =============
PER SHARE OF COMMON STOCK $ 0.02 $ 0.02 $ 0.07
============= ============== =============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 5,398,244 5,398,244 5,398,244
============= ============== =============
</TABLE>
See notes to financial statements.
-31-
<PAGE> 33
DIAGNON CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS FOR EACH OF THE YEARS
IN THE THREE YEAR PERIOD ENDED MAY 31, 1996
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 92,198 $ 121,430 $ 368,182
----------- ----------- -----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 271,763 328,254 394,351
Deferred income taxes (2,300) 181,900 44,500
Decrease (increase) in accounts receivable 45,196 65,908 (232,217)
(Increase) decrease in prepaid expenses (919) (12,257) 10,179
Decrease (increase) in other assets 28,677 (90,386) (26,654)
Increase in inventories (52,755)
Increase in accounts payable and
accrued expenses 20,583 3,546 31,149
Increase (decrease) in income taxes payable 3,258 (10,940) 2,942
Decrease in deferred income (86,579) (148,421)
----------- ----------- -----------
Total adjustments 313,503 379,446 75,829
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 405,701 500,876 444,011
----------- ----------- -----------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Capital expenditures (284,777) (126,263) (179,454)
Decrease in loans to officers 10,000 55,000
----------- ----------- -----------
NET CASH USED FOR INVESTING ACTIVITIES (284,777) (116,263) (124,454)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments under line-of-credit agreement (154,967) (270,137)
Principal payments under capital lease obligations (113,268) (75,715) (52,643)
Other (350)
----------- ----------- -----------
NET CASH USED FOR FINANCING ACTIVITIES (113,268) (231,032) (322,780)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 7,656 153,581 (3,223)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 210,887 57,306 60,529
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 218,543 $ 210,887 $ 57,306
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 50,496 $ 49,415 $ 35,319
=========== =========== ===========
Income taxes $ 24,470 $ 30,954 $ 25,457
=========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
The Company issued:
Long-term debt issued in connection with capital leases $ 289,644 $ 202,108
</TABLE>
See notes to financial statements.
-32-
<PAGE> 34
DIAGNON CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY FOR EACH OF THE YEARS
IN THE THREE YEAR PERIOD ENDED MAY 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
---------------------- ADDITIONAL -----------------------
NUMBER OF PAR PAID-IN ACCUMULATED NUMBER AT
SHARES VALUE CAPITAL DEFICIT OF SHARES COST
---------- --------- ----------- -------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JUNE 1, 1993 9,602,452 $ 96,024 $7,395,015 $ 4,141,898 (4,204,208) $(627,357)
NET INCOME (368,182)
---------- --------- ----------- -------------- ----------- ----------
BALANCE, MAY 31, 1994 9,602,452 96,024 7,395,015 3,773,716 (4,204,208) (627,357)
NET INCOME (121,430)
---------- --------- ----------- -------------- ----------- ----------
BALANCE, MAY 31, 1995 9,602,452 96,024 7,395,015 3,652,286 (4,204,208) (627,357)
NET INCOME (92,198)
---------- --------- ----------- -------------- ----------- ----------
BALANCE, MAY 31, 1996 9,602,452 $ 96,024 $7,395,015 $ 3,560,088 (4,204,208) $(627,357)
========== ========= =========== ============== =========== ==========
</TABLE>
See notes to financial statements.
-33-
<PAGE> 35
DIAGNON CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
- - ---------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The accompanying consolidated financial statements include the accounts of
Diagnon Corporation (the "Company") its wholly-owned subsidiaries, BIOQUAL,
Inc. and Enhanced Therapeutics, Inc. All significant intercompany transactions
and balances are eliminated in consolidation.
Segment Information
The Company's principal business consists of the government contract research
operations.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Fixed Assets and Depreciation
Fixed assets are stated at cost. Depreciation is provided for financial
reporting purposes using the straight-line method over the estimated useful
lives of the assets (generally three to ten years). Tax depreciation is
provided on the straight-line method. Leasehold improvements are amortized
over the lease period or the estimated useful life of the improvements,
whichever is shorter.
Inventories
Inventories are stated at the lower of cost or market.
Research and Development
All costs incurred in connection with any research and development activities
are expensed as incurred.
Revenue Recognition
Contract research revenue is generally earned based on cost-plus-fixed-fee
("CPFF") arrangements and is recognized as costs are incurred.
Income Per Share
Income per share is computed based on the weighted average number of common
shares outstanding during each period. In 1996, 1995 and 1994, common stock
options were not included in the calculation of earnings per share because they
had an immaterial effect (less than 3%).
- 34 -
<PAGE> 36
Cash and Cash Equivalents
The Company considers cash equivalents to include short-term investments which
have a maturity of 90 days or less at the date of purchase.
2. CAPITAL STOCK
Stock Options
The Company has reserved 334,000 shares of its Common Stock to cover the
exercise of options granted under its 1988 stock option plan. With the
exception of the CEO's option which expires January 19, 1999, options expire
ten years from date of grant under the plan, or upon the optionee's separation
from the Company and were granted at the average of the closing bid and ask
price of the Company's Common Stock at the date of grant. The Company has
reserved an additional 10,000 shares of its Common Stock to cover the exercise
of options granted outside its 1988 stock option plan. Option transactions were
as follows:
<TABLE>
<CAPTION>
Number of
Shares Option
Under Option Price
------------ ------
<S> <C> <C>
Outstanding, June 1, 1993 305,000 $ .08 to .3438
Granted 150,000 .4469
Cancelled (151,000) .08 to .3438
-------
Outstanding, May 31, 1994 304,000 .08 to .4469
Granted -0-
Cancelled -0-
-------
Outstanding, May 31, 1995 304,000 .08 to .4469
Granted 40,000 .375 to .5625
Cancelled -0-
-------
Outstanding, May 31, 1996 344,000 .08 to .5625
=======
</TABLE>
The number of options exercisable at May 31 were as follows:
1996 344,000
1995 304,000
1994 304,000
3. LINE OF CREDIT
The Company has a line of credit of $1,000,000 with a bank to meet periodic
cash flow needs. As of May 31, 1996, there were no borrowings under this line
of credit, the maximum amount borrowed during the fiscal year was $763,696, the
average balance outstanding was $221,101, and the average interest rate was
9.47% during 1996. The line is guaranteed by the Company's subsidiary,
BIOQUAL, and bears interest at the prime rate plus .75% and is collateralized
by trade accounts receivable. The line is subject to renewal on or before
October 29, 1996.
- 35 -
<PAGE> 37
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Capitalized Lease Obligations $402,263 $225,887
Less Current Maturities 113,918 83,075
-------- --------
Long-Term $288,345 $142,812
======== ========
</TABLE>
Future annual minimum payments under the capital leases as of May 31, 1996,
were:
<TABLE>
<S> <C>
1997 $144,543
1998 144,543
1999 124,502
2000 41,264
2001 10,591
--------
465,443
Less: Amount representing interest 63,180
--------
Present value of minimum lease payments $402,263
========
</TABLE>
The Company leases equipment under various capital leases which expire in
fiscal years 1999, 2000 and 2001. Property held under the capital leases at
May 31, 1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Equipment $479,362 $432,310
Less: Accumulated amortization 48,708 225,486
-------- --------
$430,654 $206,824
======== ========
</TABLE>
The equipment is amortized on a straight-line basis over the estimated useful
life of the equipment. Amortization expense amounted to $33,516, $66,700 and
$51,510 in 1996, 1995 and 1994, respectively, and is included with depreciation
expense in the financial statements.
The fair value of long-term debt is estimated to approximate its carrying value
at May 31, 1996 based on borrowing rates currently available with similar terms
and maturity.
5. INCOME TAXES
Income taxes are accounted for using Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109), which
requires an asset and liability approach to financial accounting and reporting
for income taxes. Under SFAS No. 109, deferred tax assets and liabilities are
provided for differences between the financial statement and tax bases of
assets and liabilities that will result in future taxable or deductible
amounts. The deferred tax assets and liabilities are measured using the
enacted tax laws and rates applicable to the periods in which the differences
are expected to affect taxable income. Income tax expense is computed as the
tax payable or refundable for the period plus or minus the change during the
period in deferred tax assets and liabilities.
- 36 -
<PAGE> 38
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current tax expense $ 27,600 $ 20,000 $ 31,800
Deferred tax (benefit) expense (2,300) 181,900 44,500
-------- -------- --------
$ 25,300 $201,900 $ 76,300
======== ======== ========
</TABLE>
A reconciliation of actual income tax expense to that which would have resulted
from applying the federal statutory tax rates is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Federal taxes at statutory
rate $ 39,949 $111,258 $151,124
State taxes at statutory rate 27,600 20,000 31,800
Executive life insurance
premiums 8,997 4,187 3,435
(Increase) decrease in
previously recognized tax
loss carryforwards (46,000) 69,649 (124,778)
Other, net (5,246) (3,194) 14,719
-------- -------- --------
$ 25,300 $201,900 $ 76,300
======== ======== ========
</TABLE>
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
May 31, May 31, May 31,
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Financial statement accruals $ 39,646 $ 41,056 $ 73,776
Different useful lives for
depreciation of fixed assets
for tax purposes 10,691 61,358 26,989
Tax loss carryforwards 1,518,000 1,564,000 1,632,000
Less: valuation allowance (722,837) (823,214) (707,665)
---------- ---------- ----------
Total deferred income taxes $ 845,500 $ 843,200 $1,025,100
========== ========== ==========
</TABLE>
As of May 31, 1996, the Company has cumulative tax operating loss carryforwards
of approximately $4,600,000 available to reduce future federal taxable income.
The operating loss carryforwards expire in fiscal years 1998 to 2003. During
the three year period ended May 31, 1996, the Company utilized $747,000 of tax
loss carryforwards. Management believes that it is more likely than not that
the Company will generate future taxable income sufficient to realize a portion
of the remaining tax loss carryforward and that the valuation allowance is
appropriate given the current estimates of future taxable income.
6. COMMITMENTS AND CONTINGENCIES
Leases
The Company is a lessee under various noncancelable operating leases, covering
the facilities in which its operations are conducted and certain equipment and
vehicles. During 1996, 1995 and 1994, the Company subleased a part of its
premises. As of May 31, 1996, there are no material sublease agreements. The
rental income earned has been offset against the Company's rental expense in
the period. The aggregate minimum annual rental commitments under these
various leases are as follows:
- 37 -
<PAGE> 39
<TABLE>
<CAPTION>
Rental
Commitment
-----------
<S> <C>
1997 $ 1,261,000
1998 1,205,000
1999 1,234,000
2000 1,114,000
2001 1,147,000
</TABLE>
Facilities leases contain options for five-year extensions.
Rental expense was approximately $1,388,000, net of $10,000 of sublease income,
$1,355,000, net of $9,000 of sublease income, and $1,235,000, net of $15,000 of
sublease income, for the years ended May 31, 1996, 1995 and 1994, respectively.
Government contracts
Substantially all of the Company's revenue is from U.S. Government contracts.
The indirect rates used in CPFF contracts are subject to final negotiated
settlements at the end of each fiscal year.
7. RELATED PARTIES
The following schedule presents information regarding loans to officers for the
three year period ended May 31, 1996.
<TABLE>
<CAPTION>
Balance at Balance
Beginning of at End of
Name of Person Period Additions Repayments Period
- - -------------- ------------ --------- ---------- ---------
<S> <C> <C> <C> <C>
Year Ended May 31, 1996:
President $ 90,000 $ -0- $ -0- $ 90,000
Year Ended May 31, 1995:
President $ 90,000 $ -0- $ -0- $ 90,000
Executive Vice President 10,000 -0- 10,000 -0-
Year Ended May 31, 1994:
President $120,000 $ -0- $30,000 $ 90,000
Executive Vice President 35,000 -0- 25,000 10,000
</TABLE>
The loan to the President bears interest at the six month certificate of
deposit rate. On October 11, 1995, the Company's shareholders affirmatively
voted to approve the purchase of common stock of the Company held by Dr. Landon
at fair market value in an amount sufficient to fund the payment of the $45,000
installment payment, plus accrued interest, due after fiscal year 1995 and in a
similar manner to purchase common stock of the Company held by Dr. Landon at
fair market value in an amount sufficient to fund the payment of the final
$45,000 installment payment, plus accrued interest, due after fiscal year 1996.
The 1996 payment would be made within six weeks after the end of fiscal year
1996. As of July 29, 1996, the neither the stock purchase or the loan
repayment transaction have occurred.
- 38 -
<PAGE> 40
The President had an employment agreement with the Companywhich expired May
1996, subsequently the Board of Directors extended the agreement until May 31,
1997 at the same terms and conditions. The agreement continues to provide a
base compensation and additional incentive compensation dependent upon annual
operations.
The loan to the Executive Vice President bore interest at the six month
certificate of deposit rate plus one percent as quoted by Signet Bank/MD. The
loan was paid in full during March 1995.
- 39 -
<PAGE> 1
(10) Government Contracts
<PAGE> 2
(10) Government Contracts
1. Biological Testing Facility.
<PAGE> 3
<TABLE>
<CAPTION>
DHHS ###-##-#### OMB NO. 0990-0115
====================================================================================================================================
<S> <C> <C>
AWARD/CONTRACT 1. THIS CONTRACT IS RATED ORDER RATING PAGE OF PAGES
UNDER DPAS (15 CFR 350) 1 60
- - ------------------------------------------------------------------------------------------------------------------------------------
2. CONTRACT NO. (Proc. Inst. Indent.) 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQUEST/PROJECT NO.
NO1-HD-6-3259 09/01/96 96-3259-00
- - ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
5. ISSUED BY CODE 6. ADMINISTERED BY (if other than Item 5) CODE
------------------------ -----------------
Contracts Management Branch, NICHD
National Institutes of Health, PHS, DHHS COPY
Executive Building, Suite 7A07
6100 EXECUTIVE BLVD MSC 7510
BETHESDA MD 20892-7510
- - ------------------------------------------------------------------------------------------------------------------------------------
7. NAME AND ADDRESS OF CONTRACTOR (No., street, city, county, State and ZIP Code) 8. DELIVERY
<S> <C>
BIOQUAL, Inc. / / FOB ORIGIN /X/ OTHER (See below)
9600 Medical Center Drive
Rockville, MD 20850 ------------------------------------------------
9. DISCOUNT FOR PROMPT PAYMENT
------------------------------------------------
10. SUBMIT INVOICES ITEM
(4 copies unless otherwise See Section G.4
specified)
- - -----------------------------------------------------------------------------------
CODE FACILITY CODE TO THE ADDRESS SHOWN IN:
- - ------------------------------------------------------------------------------------------------------------------------------------
11. SHIP TO/MARK FOR CODE 12. PAYMENT WILL BE MADE BY CODE
------------------------ -----------------
See Section J. Attachment J.1.b See Section G.4
F.O.B. Destination
- - ------------------------------------------------------------------------------------------------------------------------------------
13. AUTHORITY FOR USING OTHER THAN FULL AND OPEN COMPETITION 14. ACCOUNTING AND APPROPRIATION DATA
N/A CAN: 6-8420946 ($2,793,568) O.C. 25.55
/ / 10 U.S.C. 2304(c)( ) / / 41 U.S.C. 253(c)( ) DOC: 300NIHD63259A TIN: 1-521244771-A1
- - ------------------------------------------------------------------------------------------------------------------------------------
15A. ITEM NO. 15B. SUPPLIES/SERVICES 15C. QUANTITY 15D. UNIT 15E. UNIT PRICE 15F. AMOUNT
- - ------------------------------------------------------------------------------------------------------------------------------------
Title: "Biological Testing Facility" Incremental Funding
----------- --------------
Principal Investigator: Jerry R. Reel, Ph.D. FY 96 $ 2,793,568.00
FY 97 2,897,666.00
Contract Type: Cost-Plus-Fixed-Fee (Term) FY 98 3,004,999.00
FY 99 3,107,788.00
Expiration Date: June 30, 2001 FY 00 3,211,870.00
- - ------------------------------------------------------------------------------------------------------------------------------------
15G. TOTAL AMOUNT OF CONTRACT -} $15,015,891.00
- - ------------------------------------------------------------------------------------------------------------------------------------
16. TABLE OF CONTENTS
- - ------------------------------------------------------------------------------------------------------------------------------------
(X) SEC. DESCRIPTION PAGE(S) (X) SEC. DESCRIPTION PAGE(S)
- - ------------------------------------------------------------------------------------------------------------------------------------
PART I - THE SCHEDULE PART II - CONTRACT CLAUSES
- - ------------------------------------------------------------------------------------------------------------------------------------
X A SOLICITATION/CONTRACT FORM X I CONTRACT CLAUSES
- - ------------------------------------------------------------------------------------------------------------------------------------
X B SUPPLIES OR SERVICES AND PRICES/COSTS PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACH.
- - ------------------------------------------------------------------------------------------------------------------------------------
X C DESCRIPTIONS/SPECS./WORK STATEMENT X J LIST OF ATTACHMENTS
- - ------------------------------------------------------------------------------------------------------------------------------------
X D PACKAGING AND MARKING PART IV - REPRESENTATIONS AND INSTRUCTIONS
- - ------------------------------------------------------------------------------------------------------------------------------------
X E INSPECTION AND ACCEPTANCE X K REPRESENTATIONS, CERTIFICATIONS AND
- - ------------------------------------------------------------------- OTHER STATEMENTS OF OFFERORS
X F DELIVERIES OR PERFORMANCE
- - ------------------------------------------------------------------------------------------------------------------------------------
X G CONTRACT ADMINISTRATION DATA N/A L INSTRS., CONDS., AND NOTICES TO OFFER
- - ------------------------------------------------------------------------------------------------------------------------------------
X H SPECIAL CONTRACT REQUIREMENTS N/A M EVALUATION FACTORS FOR AWARD
- - ------------------------------------------------------------------------------------------------------------------------------------
CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE
- - ------------------------------------------------------------------------------------------------------------------------------------
17. /X/ CONTRACTOR'S NEGOTIATED AGREEMENT (Contractor is required 18. / / AWARD (Contractor is not required to sign this
to sign this document and return 1 copies to issuing office.) document.) Your offer on Solicitation Number ___, including
Contractor agrees to furnish and deliver all items or perform all the additions or changes made by you which additions or
the services set forth or otherwise identified above and on any changes are set forth in full above, is hereby accepted as to
continuation sheets for the consideration stated herein. The the items listed above and on any continuation sheets. This
rights and obligations of the parties to this contract shall be award consummates the contract which consists of the
subject to and governed by the following documents: (a) this following documents: (a) the Government's solicitation and
award/contract, (b) the solicitation, if any, and (c) such your offer, and (b) this award/contract. No further
provisions, representations, certifications, and specifications, contractual document is necessary.
as are attached or incorporated by reference herein.
(Attachments are listed herein.)
- - ------------------------------------------------------------------------------------------------------------------------------------
19A. NAME AND TITLE OF SIGNER (Type or print) 20A. NAME OF CONTRACTING OFFICER
Paul J. Duska
[name] Contracts Management Branch, OAM, NICHD
- - ------------------------------------------------------------------------------------------------------------------------------------
19B. NAME OF CONTRACTOR 19C. DATE SIGNED 20B. UNITED STATES OF AMERICA 20C. DATE SIGNED
BY [sig] 8/8/96 BY /s/ PAUL J. DUSKA 8/12/96
------------------------------------------- -------------------------------------------
(Signature of person authorized to sign) (Signature of Contract Officer)
====================================================================================================================================
STANDARD FORM 26 REV (4-85)
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
PART I - THE SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
SECTION A - SOLICITATION/CONTRACT FORM . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
SF 26 AWARD/CONTRACT Page 1 of Pages . . . . . . . . . . . . . . . . . . . . . . . A-1
SECTION B - SUPPLIES OR SERVICES AND PRICE/COSTS . . . . . . . . . . . . . . . . . . . . . . . B-1
B.1 BRIEF DESCRIPTION OF SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
B.2 HHSAR 352.232-74 CONSIDERATION - ESTIMATED COST AND FIXED FEE . . . . . . . . . . B-1
(APR 1984)
B.3 ADVANCE UNDERSTANDINGS (NIH 1240) (JUL 1986) . . . . . . . . . . . . . . . . . . B-1
B.4 LIMITATION OF FUNDS--COST-PLUS-FIXED-FEE/COST-PLUS- . . . . . . . . . . . . . . . . B-2
INCENTIVE-FEE (NIH 1255) (NOV 1988)
B.5 CLAUSES APPLICABLE TO DIRECT COSTS . . . . . . . . . . . . . . . . . . . . . . . . B-2
(NIH 2990A) (JUN 1989)
B.6 PRE-CONTRACT COSTS (NIH 3000) (JUL 1986) . . . . . . . . . . . . . . . . . . . . B-3
B.7 FEE TIED TO LEVEL OF EFFORT (NIH 3005) (JUL 1986) . . . . . . . . . . . . . . . . B-3
B.8 GOVERNMENT DISCOUNT AIR TRAVEL RATES (NIH 3161) (MAY 1989) . . . . . . . . . . . B-4
B.9 INCREMENTAL FUNDING ALLOCATION ALTERNATE I . . . . . . . . . . . . . . . . . . . . B-4
(NIH 3175) (AUG 1988)
SECTION C - DESCRIPTION/SPECIFICATIONS/WORK STATEMENT . . . . . . . . . . . . . . . . . . . . . C-1
C.1 WORK STATEMENT/SPECIFICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
(NIH 1040B) (JUL 1986)
SECTION D - PACKAGING AND MARKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1
[For this Contract, there are NO clauses in this Section] . . . . . . . . . . . . . . . . D-1
SECTION E - INSPECTION AND ACCEPTANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1
E.1 NOTICE LISTING CONTRACT CLAUSES INCORPORATED BY REFERENCE . . . . . . . . . . . . . E-1
E.2 INSPECTION AND ACCEPTANCE (NIH 3045) (MAY 1989) . . . . . . . . . . . . . . . . . E-1
SECTION F - DELIVERIES OR PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
F.1 NOTICE LISTING CONTRACT CLAUSES INCORPORATED BY REFERENCE . . . . . . . . . . . . . F-1
F.2 PERIOD OF PERFORMANCE (NIH 1060) (MAY 1989) . . . . . . . . . . . . . . . . . . . F-1
F.3 LEVEL OF EFFORT---COST-REIMBURSEMENT TERM CONTRACT . . . . . . . . . . . . . . . . F-1
(NIH 1050) (NOV 1988)
F.4 VARIATIONS IN PERFORMANCE--TOTAL EFFORT . . . . . . . . . . . . . . . . . . . . . . F-2
(NIH 3030) (JUL 1986)
F.5 REPORTING REQUIREMENTS (NIH 3055B) (MAR 1988) . . . . . . . . . . . . . . . . . . F-2
SECTION S - CONTRACT ADMINISTRATION DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . G-1
G.1 KEY PERSONNEL (NIH 3060) (JUL 1986) . . . . . . . . . . . . . . . . . . . . . . . G-1
G.2 PROJECT OFFICER (NIH 1900) (NOV 1988) . . . . . . . . . . . . . . . . . . . . . . G-1
G.3 INDIRECT COST RATES (NIH 1295) (JUL 1986) . . . . . . . . . . . . . . . . . . . . G-2
G.4 INVOICE SUBMISSION (NIH RC-1A) (DEC 1988) ALTERNATE I . . . . . . . . . . . . . . G-2
G.5 CONTRACT FINANCIAL REPORT (NIH 2706) (APR 1992) . . . . . . . . . . . . . . . . . G-3
G.6 GOVERNMENT PROPERTY (NIH 3065) (JUL 1986) . . . . . . . . . . . . . . . . . . . . G-3
G.7 GOVERNMENT FURNISHED PROPERTY - SCHEDULE II-A . . . . . . . . . . . . . . . . . . . G-4
NIH 3065c) (JUL 1986)
SECTION H - SPECIAL CONTRACT REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . H-1
H.1 HHSAR 352.270-6 PUBLICATIONS AND PUBLICITY (JUL 1991) . . . . . . . . . . . . . . H-1
H.2 PHS 352.223-70 SAFETY AND HEALTH (APR 1984) . . . . . . . . . . . . . . . . . . . H-1
H.3 HUMAN SUBJECTS (NIH 3085) (JUL 1986) . . . . . . . . . . . . . . . . . . . . . . H-2
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
H.4 SALARY RATE LIMITATIONS LEGISLATION (NIH 3102) (OCT 1993). . . . . . . . . . . . . H-2
H.5 ANIMAL WELFARE ASSURANCE (NIH 3200) (JUN 1993) . . . . . . . . . . . . . . . . . . H-3
H.6 ACKNOWLEDGEMENT OF SUPPORT (NIH 3480)(FEB 1992) . . . . . . . . . . . . . . . . . H-3
PART II - CONTRACT CLAUSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
SECTION I - CONTRACT CLAUSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
I.1 CONTRACT CLAUSES (NIH 3105B) (MAR 1988) . . . . . . . . . . . . . . . . . . . . . I-1
I.2 CLAUSES INCORPORATED IN FULL TEXT (NIH 3110) (JUL 1986) . . . . . . . . . . . . . I-1
I.3 NOTICE LISTING CONTRACT CLAUSES INCORPORATED BY REFERENCE . . . . . . . . . . . . . I-1
I.4 52.203-9 REQUIREMENT FOR CERTIFICATE OF PROCUREMENT . . . . . . . . . . . . . . . I-3
INTEGRITY-MODIFICATION (SEP 1995)
I.5 52.222-2 PAYMENT FOR OVERTIME PREMIUMS (JUL 1990) . . . . . . . . . . . . . . . . I-5
I.6 52.252-2 CLAUSES INCORPORATED BY REFERENCE (JUN 1988) . . . . . . . . . . . . . . I-6
PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACHMENTS . . . . . . . . . . . . . . . . J-1
SECTION J - LIST OF ATTACHMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J-1
J.1 LIST OF ATTACHMENTS (NIH 1365) (JUL 1986) . . . . . . . . . . . . . . . . . . . . J-1
PART IV - REPRESENTATIONS AND INSTRUCTIONS . . . . . . . . . . . . . . . . . . . . . . . . . K-1
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND . . . . . . . . . . . . . . . . . . . . . K-1
OTHER STATEMENTS OF OFFERORS
K.1 REPRESENTATIONS AND CERTIFICATIONS (NIH 3115) (JUN 1986) . . . . . . . . . . . . . K-1
</TABLE>
<PAGE> 6
NO1-HD-6-3259 Section B
PART I - THE SCHEDULE
SECTION B - SUPPLIES OR SERVICES AND PRICE/COSTS
B.1 BRIEF DESCRIPTION OF SERVICES
The major objective of this project is to provide for the operation and
maintenance of a biological testing facility.
B.2 HHSAR 352.232-74 CONSIDERATION - ESTIMATED COST AND FIXED FEE
(APR 1984)
It is estimated that the total cost to the Government for full performance
of this contract will be $15,015,891.00, of which the sum of $14,164,742.00
represents the estimated reimbursable costs and $851,149.00 represents the
fixed-fee.
B.3 ADVANCE UNDERSTANDINGS (NIH 1240) (JUL 1986)
Other clauses of this contract notwithstanding, approval of the following
items within the limits set forth is hereby granted:
a. Consultant fee to be paid to the following individual for pathology
services:
Total Cost
Name Rate Number of Hours Not to Exceed
Dr. F. M. Garner $73/Hr* 64 $5,000
*Escalated at 4% per year for years 2 through 5.
b. Clinical chemistry services in a total amount not to exceed
$15,000 for the period stated in Section F.
c. Pathology services in a total amount not to exceed $45,000 for
the period stated in Section F.
d. The contractor has agreed that the following individuals will be
assigned to this contract at 100% effort:
Principal Investigator
Manager, Bioassay
Manager, Immunoassay
Bioassay Technicians (5)
Immunoassay Technicians (3)
e. A subcontract document and negotiated cost for toxicology
studies shall be submitted to the Contracting Officer for approval
B-1
<PAGE> 7
NO1-HD-6-3259 Section B
prior to award.
B.4 LIMITATION OF FUNDS--COST-PLUS-FIXED-FEE/COST-PLUS-
INCENTIVE-FEE (NIH 1255) (NOV 1988)
(a) Total funds currently available for payments and allotted to this
contract are $2,793,568.00, of which $2,636,131.00 represents the estimated
costs, and of which $157,437.00 represents the fixed fee. For further
provisions on funding, see the LIMITATION OF FUNDS clause referenced in
SECTION I of this contract.
(b) It is estimated that the amount currently alloted will cover
performance of the contract through June 30, 1997.
(c) The contracting officer may allow additional funds to the contract
without the concurrence of the contractor.
B.5 CLAUSES APPLICABLE TO DIRECT COSTS
(NIH 2990A) (JUN 1989)
(a) Items Unallowable Unless Otherwise Provided
Notwithstanding the Clause ALLOWABLE COST AND PAYMENT (and FIXED FEE, if
applicable) referenced in SECTION I of this contract, unless authorized in
writing by the Contracting Officer, the costs of the following items or
activities shall be unallowable as direct costs:
(1) Acquisition, by purchase or lease, of any interest in real property;
(2) Special rearrangement or alteration of facilities;
(3) Purchase or lease of ANY item of general purpose office furniture or
office equipment regardless of dollar value (General purpose equipment is
defined as any items of personal property which are usable for purposes other
than research, such as office equipment and furnishings, pocket calculators,
etc.); and
(4) Travel to attend general scientific meetings;
(5) Patient care costs;
(6) Accountable Government property (defined as both real and personal
property with an acquisiton cost of $1,000 or more and a life expectancy of
more than two years) and "sensitive items" (defined and listed in the
CONTRACTOR'S GUIDE FOR CONTROL OF GOVERNMENT PROPERTY, 1990) regardless of
acquisition value.
(b) Travel Costs
(1) Domestic Travel
a. Total expenditures for domestic travel (transportation, lodging,
subsistence, and incidental expenses) incurred in direct
B-2
<PAGE> 8
NO1-HD-6-3259 Section B
performance of this contract shall not exceed $.00 without the prior written
approval of the Contracting Officer.
b. This contract is subject to the provisions of Section 24 of
Public Law 99-234 which amends the Office of Federal Procurement Policy Act to
provide that contractor costs for travel, including lodging, other
subsistence, and incidental expenses, shall be allowable only to the extent
that they do not exceed the amount allowed Federal employees.
The contractor, therefore, shall invoice and be reimbursed for all travel
costs in accordance with Federal Acquisition Regulations (FAR) 31.205-46.
(2) Foreign Travel
Requests for foreign travel must be submitted at least six weeks in
advance, and shall contain the following:
a. Meeting(s) and place(s) to be visited, with costs and dates;
b. Names and titles of contractor personnel to travel, their
functions in the contract project;
c. Contract purposes to be served by the travel;
d. How travel of contractor personnel will benefit and contribute to
accomplishing the contract project, or will otherwise justify the
expenditure of NIH contract funds;
e. How such advantages justify the costs for travel and absence from
the project of more than one person if such are suggested; and
f. What additional functions may be performed by the travelers to
accomplish other purposes of the contract and thus further benefit
the project.
B.6 PRE-CONTRACT COSTS (NIH 3000) (JUL 1986)
Within the dollar limitation set forth under this SECTION B, below, the
Contractor shall be entitled to reimbursement for costs incurred during the
period July 1, 1996 through August 31, 1996 in an amount not to exceed
$465,595.00, which if incurred after this contract had been entered into,
would have been reimbursable under the provisions of this contract.
B.7 FEE TIED TO LEVEL OF EFFORT (NIH 3005) (JUL 1986)
The fixed fee shall be paid in direct ratio to the level of effort
expended; that is, the percent of fee paid shall be equal to the percent of
total effort expended. Payment shall be subject to the withholding provisions
of the Clauses ALLOWABLE COST AND PAYMENT, and FIXED FEE referenced in SECTION
I of this contract. Payment of
B-3
<PAGE> 9
NO1-HD-6-3259 Section B
fixed fee shall not be made in less than monthly increments.
B.8 GOVERNMENT DISCOUNT AIR TRAVEL RATES (NIH 3161) (MAY 1989)
(a) To the maximum extent practicable consistent with travel requirements,
the contractor agrees to use the reduced air transportation rates and services
provided through available government discount air fares. These fares are
available only for bona-fide employees' travel that is otherwise reimbursable
as a direct cost pursuant to this contract. The objective is to achieve the
lowest overall cost to the contractor and, thus, to the Government. The
contractor shall submit written requests to the contracting officer for
authorization to use these rates. The request shall provide the full name of
the traveler(s), the number of the contract for which the travel is being
performed, the contract objective that is to be fulfilled, and the dates
during which the travel is to occur. Contracting officer approval, if given,
will be on official agency letterhead so that the letter can be presented to
the airlines as confirmation of the authorization.
(b) Nothing in this clause shall authorize transportation or services
which are not otherwise reimbursable under this contract. Nothing in this
clause requires air carriers to make available to the contractor any
government discount air fares.
B.9 INCREMENTAL FUNDING ALLOCATION ALTERNATE I (NIH 3175) (AUG 1988)
Increments to be allotted to this contract are estimated as follows:
<TABLE>
<CAPTION>
PERIOD COST FIXED FEE AMOUNT
<S> <C> <C> <C>
FY96 7/01/96 6/30/97 $ 2,636,131 $ 157,437 $ 2,793,568
FY97 7/01/97 - 6/30/98 2,733,876 163,790 2,897,666
FY98 7/01/98 - 6/30/99 2,834,658 170,341 3,004,999
FY99 7/01/99 - 6/30/00 2,931,174 176,614 3,107,788
FY00 7/01/00 - 6/30/01 3,028,903 182,967 3,211,870
TOTAL AMOUNT $14,164,742 $851,149 $ 15,015,891
</TABLE>
B-4
<PAGE> 10
NO1-HD-6-3259 Section C
SECTION C - DESCRIPTION/SPECIFICATIONS/WORK STATEMENT
C.1 WORK STATEMENT/SPECIFICATIONS
(NIH 1040B) (JUL 1986)
Independently and not as an agent of the Government, the Contractor shall
furnish all the necessary services, qualified personnel, material, equipment,
and facilities, not otherwise provided by the Government, as needed to perform
the Statement of Work/Specifications set forth in Section J attached hereto
and made a part of this document.
C-1
<PAGE> 11
NO1-HD-6-3259 Section D
SECTION D - PACKAGING AND MARKING
---------------------------------
[For this Contract, there are NO clauses in this Section]
D-1
<PAGE> 12
NO1-HD-6-3259 Section E
SECTION E - INSPECTION AND ACCEPTANCE
-------------------------------------
E.1 NOTICE LISTING CONTRACT CLAUSES INCORPORATED BY REFERENCE
The following contract clauses pertinent to this section are hereby
incorporated by reference (by Citation Number, Title, and Date) in accordance
with the clause at FAR "52.252-2 CLAUSES INCORPORATED BY REFERENCE (JUN 1988)"
in Section I of this contract.
NUMBER TITLE DATE
FEDERAL ACQUISITION REGULATION (48 CFR Chapter 1)
52.246-9 INSPECTION OF RESEARCH AND DEVELOPMENT APR 1984
(SHORT FORM)
E.2 INSPECTION AND ACCEPTANCE (NIH 3045) (MAY 1989)
(a) The Contracting Officer or the duly authorized representative will
perform inspection and acceptance of materials and services to be provided.
(b) For the purposes of this CLAUSE the designated Project Officer is
the authorized representative of the Contracting Officer.
(c) Inspection and acceptance will be performed by the Project Officer
at the address listed in the clause "Project Officer" in Section G.
(d) Acceptance may be presumed unless otherwise indicated in writing by
the Contracting Officer or the duly authorized representative within 30 days
of receipt.
E-1
<PAGE> 13
NO1-HD-6-3259 Section F
SECTION F - DELIVERIES OR PERFORMANCE
-------------------------------------
F.1 NOTICE LISTING CONTRACT CLAUSES INCORPORATED BY REFERENCE
The following contract clauses pertinent to this section are hereby
incorporated by reference (by Citation Number, Title, and Date) in accordance
with the clause at FAR "52.252-2 CLAUSES INCORPORATED BY REFERENCE (JUN
1988)" in Section I of this contract.
NUMBER TITLE DATE
FEDERAL ACQUISITION REGULATION (48 CFR Chapter 1)
52.242-15 STOP-WORK ORDER AUG 1989
ALTERNATE I (APR 1984)
52.247-34 F.O.B. DESTINATION NOV 1991
F.2 PERIOD OF PERFORMANCE (NIH 1060) (MAY 1989)
The period of performance of this contract shall be from September 1,
1996 through June 30, 2001. The period of performance includes submission of
any final report and all other deliverables set forth in this Section F and/or
in the work statement/specifications of Section C. Precontract costs shall be
covered from the period July 1, 1996 through August 31, 1996.
F.3 LEVEL OF EFFORT--COST-REIMBURSEMENT TERM CONTRACT
(NIH 1050) (NOV 1988)
(a) During the period of performance of this contract and the
precontract cost period, the Contractor shall provide 150,580 direct labor
hours. The effort does not include vacation, sick leave and holiday. The
effort includes any subcontractor labor effort.
(b) It is estimated that the labor effort is constituted as specified
below and will be expended approximately as follows:
MEDICAL CENTER
LABOR CATEGORY YR 1 YR 2 YR 3 YR 4 YR5
Principal Investigator 1,880 1,880 1,880 1,880 1,880
Manager, Bioassay/Tox. 1,880 1,880 1,880 1,880 1,880
Manager, Immunoassay/
Biochemistry 1,880 1,880 1,880 1,880 1,880
BIO/TOX Technicians 9,856 9,856 9,856 9,856 9,856
IMMUNO/BIOCHEM Techs. 5,640 5,640 5,640 5,640 5,640
F-1
<PAGE> 14
NO1-HD-6-3259 Section F
<TABLE>
<S> <C> <C> <C> <C> <C>
Animal Technicians 4,216 4,216 4,216 4,216 4,216
Quality Assurance 94 94 94 94 94
TOTAL MEDICAL CENTER 25,446 25,446 25,446 25,446 25,446
RESEARCH BOULEVARD
LABOR CATEGORY
Veterinarian 226 226 226 226 226
BIO/TOX Technicians 2,068 2,068 2,068 2,068 2,068
Animal Technicians 2,376 2,376 2,376 2,376 2,376
TOTAL RESEARCH BLVD. 4,670 4,670 4,670 4,670 4,670
TOTAL DIRECT LABOR 30,116 30,116 30,116 30,116 30,116
</TABLE>
F.4 VARIATIONS IN PERFORMANCE--TOTAL EFFORT (NIH 3030) (JUL 1986)
The Contractor shall have satisfied the requirement herein if not less than
90% nor more than 110% of the total effort specified above is furnished.
In the event less effort than the minimum specified number of direct labor
effort in the total categories is used by the Contractor in accomplishing the
prescribed work and the Government has not invoked its rights under FAR Clause
52.249-6, TERMINATION (Cost-Reimbursement), incorporated in this contract,
these parties agree that the fee will be adjusted based solely upon the
quantity of effort by which the number furnished is less than the effort
specified in this Section F. The resulting adjustment shall be evidenced by a
contract modification.
F.5 REPORTING REQUIREMENTS (NIH 3055B) (MAR 1988)
Technical Reporting Requirements needed for performance of this contract
are set forth as an attachment as listed in Section J.
F-2
<PAGE> 15
NO1-HD-6-3259 Section G
SECTION G - CONTRACT ADMINISTRATION DATA
----------------------------------------
G.1 KEY PERSONNEL (NIH 3060) (JUL 1986)
(a) The personnel specified in this contract are considered to be
essential to the work being performed hereunder. Prior to diverting any of the
specified individuals to other programs, the Contractor shall notify the
Contracting Officer reasonably in advance and shall submit justification
(including proposed substitutions) in sufficient detail to permit evaluation
of the impact on the program. No diversion shall be made by the Contractor
without the written consent of the Contracting Officer; provided, that the
Contracting Officer may ratify in writing such diversion and such ratification
shall constitute the consent of the Contracting Officer required by this
clause. The contract may be amended from time to time during the course of the
contract to either add or delete personnel, as appropriate.
(b) The following individuals are considered to be essential to the
performance hereunder:
<TABLE>
<CAPTION>
NAME TITLE
<S> <C>
Jerry R. Reel, Ph.D. Principal Investigator
Sheri Hild-Petito, Ph.D. Manager, Bioassay/Toxicology
Janice M. Larner, Ph.D. Manager, Immunoassay/Biochemistry
</TABLE>
G.2 PROJECT OFFICER (NIH 1900) (NOV 1988)
The following Project Officer(s) will represent the Government for the
purpose of this contract:
Richard P. Blye, Ph.D.
Contraceptive Development Branch, NICHD
Executive Building, Suite 8B13P
6100 Executive Blvd., MSC 7510
BETHESDA MD 20892-7510
The Project Officer is responsible for (1) monitoring the Contractor's
technical progress, including the surveillance and assessment of performance
and recommending to the Contracting Officer changes in requirements; (2)
interpreting the Statement of Work and any other technical performance
requirements; (3) performing technical evaluation as required; (4)
performing technical inspections and acceptance required by this contract; and
(5) assisting in the resolution of technical problems encountered during
performance.
G-1
<PAGE> 16
NO1-HD-6-3259 Section G
The Contracting Officer is the only person with authority to act as agent
of the Government under this contract. Only the Contracting Officer has
authority to: (1) direct or negotiate any changes in the Statement of Work;
(2) modify or extend the period of performance; (3) change the delivery
schedule; (4) authorize reimbursement to the contractor any costs incurred
during the performance of this contract; or (5) otherwise change any terms and
conditions of this contract.
The Government may unilaterally change its Project Officer designation.
G.3 INDIRECT COST RATES (NIH 1295) (JUL 1986)
(a) In accordance with Federal Acquisition Regulation (FAR) (48 CFR
Chapter 1) Clause 52.216-7(d)(2), Allowable Cost and Payment incorporated by
reference in this contract in Section I, the cognizant Contracting Officer
responsible for negotiating provisional and/or final indirect cost rates is
identified as follows:
Chief, Financial Advisory Services Branch
Division of Contracts and Grants, NIH
Executive Building, Suite 6A-03
6100 Executive Blvd. MSC 7510
Bethesda, Maryland 20892-7510
These rates are hereby incorporated without further action of the
contracting officer.
G.4 INVOICE SUBMISSION (NIH RC-IA) (DEC 1988) ALTERNATE I
Invoice/Financing Request Instructions for NIH Cost-Reimbursement Type
Contracts, NIH(RC)-1, are attached and made part of this contract
(See Attachment in Section J). The instructions and the following directions
for the submission of invoice/financing requests must be followed to meet the
requirements of a "proper" payment request, pursuant to FAR 32.9.
(a) Invoices/financing requests shall be submitted concurrently as
follows:
(1) An original and two copies to the following designated payment
office:
National Institutes of Health
Office of Financial Management
Chief, Contract Accounting Branch
Building 31, Room B1BO5A
31 CENTER DR. MSC 2050
BETHESDA, MARYLAND 20892-2050
(2) Three copies to the contracting officer at the issuing
G-2
<PAGE> 17
NO1-HD-6-3259 Section G
address on page 1 of Section A.
(b) Inquiries regarding payments should be directed to the designated
payment office, attention: Chief, Contract Accounting Branch, (301) 496-6452.
G.5 CONTRACT FINANCIAL REPORT (NIII 2706) (APR 1992)
(See Attachment in Section J)
(a) Financial reports on the attached Form NIH-2706, Financial Report of
Individual Project/Contract, shall be submitted by the Contractor in accordance
with the instructions which accompany the form, in an original and two copies,
not later than thirty (30) working days after the close of the reporting
period. The line entries for subdivisions of work and elements of cost
(expenditure categories) which shall be reported within the total contract are
listed in paragraph (e) below. Subsequent, changes and/or additions in the
line entries shall be made in writing.
(b) The first financial report shall cover the period consisting of the
first full three calendar months following the date of the contract, in
addition to any fractional part of the initial month. Thereafter, reports shall
be submitted on a QUARTERLY basis.
(c) The Contracting Officer may require the Contractor to submit detailed
support for costs contained in one or more interim financial reports. This
clause does not supersede the record retention requirements in FAR Part 4.7.
(d) Unless otherwise stated in that part of the NIH 2706, Instructions,
entitled "Preparation Instructions" all columns A through J, shall be
completed for each report submitted.
(e) The following expenditure categories shall be reported:
(Expenditures shall be reported in detail as set forth in the attached NIH
2706.)
G.6 GOVERNMENT PROPERTY (NIH 3065) (JUL 1986)
(a) In addition to the requirements of the clause, GOVERNMENT PROPERTY,
referenced in SECTION I of this contract, the Contractor shall comply with the
DHHS Publication, CONTRACTOR'S GUIDE FOR CONTROL OF GOVERNMENT PROPERTY,
(1990), which is incorporated into this contract by reference. Among other
issues, this publication provides a summary of the Contractor's
responsibilities regarding purchasing authorizations, inventory, and reporting
requirements under the contract. A copy of this publication is available upon
request to the Contract Property Administrator at the following address:
Contract Property Administrator
G-3
<PAGE> 18
NO1-HD-6-3259 Section G
Research Contracts Property Administration, NIH
Building 13, Room 2E-65
9000 Rockville Pike
Bethesda, Maryland 20892
(301) 496-6467
G.7 GOVERNMENT FURNISHED PROPERTY - SCHEDULE II-A NIH 3065c) (JUL 1986)
Pursuant to the Clause, GOVERNMENT PROPERTY, referenced in SECTION I of
this contract, the Contractor is hereby authorized to retain custody of the
property listed in the attached Schedule II-A for use in direct performance of
this contract. Accountability for the items listed in Schedule II-A is hereby
transferred to this contract from predecessor Contract No. NO1-HD-1-3130, under
which these items were provided by the Government. Title to this property
shall remain in the Government.
G-4
<PAGE> 19
NO1-HD-6-3259 Section H
SECTION H - SPECIAL CONTRACT REQUIREMENTS
H.1 HHSAR 352.270-6 PUBLICATIONS AND PUBLICITY (JUL 1991)
(a) Unless otherwise specified in this contract, the Contractor is
encouraged to publish the results of its work under this contract. A copy of
each article submitted by the Contractor for publication shall be promptly sent
to the Project Officer. The Contractor shall also inform the Project Officer
when the article or other publication is published, and furnish a copy of it as
finally published.
(b) The Contractor shall include in any publication resulting from work
performed under this contract a disclaimer reading as follows:
The content of this publication does not necessarily reflect the views
or policies of the Department of Health and Human Services, nor does
mention of trade names, commercial products, or organizations imply
endorsement by the U.S. Government.
H.2 PHS 352.223-70 SAFETY AND HEALTH (APR 1984)
(a) In order to provide safety controls for protection to the life and
health of employees and other person; for prevention of damage to all
property; and for avoidance of work interruptions in the performance of the
contract; the Contractor will comply with the following standards: (Insert
codes, standards, and criteria (including any applicable State and local
requirements) prescribed by the Safety Officer).
Further, the Contractor shall take or cause to be taken such additional
safety measures as the Contracting Officer may determine to be reasonably
necessary; Provided, that, if compliance with such additional safety measures
results in a material increase in the cost or time of performance of the
contract, an equitable adjustment will be made in accordance with the clause of
this contract entitled "Changes."
(b) Prior to commencement of work, the Contractor will submit in writing
its plan for complying with the safety and health provisions of this contract,
and will meet with the Contracting Officer or his/her designated representative
to discuss and develop a mutual understanding relative to administration of the
overall safety program.
H-1
<PAGE> 20
NO1-HD-6-3259 Section H
(c) During the performance of work under this contract, the Contractor
shall comply with all procedures prescribed by the Contracting Officer for the
control and safety of persons visiting the job site and will comply with such
requirements to prevent accidents as may be prescribed by the Contracting
Officer.
(d) The Contractor will maintain an accurate record of, and report to the
Contracting Officer in such manner as the Contracting Officer may prescribe,
all accidents and incidents resulting in death, traumatic injury, occupational
disease, and/or damage to all property incident to work performed under the
contract.
(e) The Contracting Officer shall notify (if otherwise, confirm in
writing) the Contractor of any noncompliance with the provisions of this
clause and corrective action to be taken. After receipt of such notice, the
Contractor shall immediately take such corrective action. (Such notice, when
delivered to the Contractor or its representative at the site of the work,
shall be deemed sufficient for the purpose.) If the Contractor fails or
refuses to comply promptly, the Contracting Officer may issue an order stopping
all or part of the work until satisfactory corrective action has been taken.
No part of the time lost due to any such stop order shall be the subject of
claim for extension of time or for costs or damages by the Contractor.
(f) The Contractor shall insert the substance of this clause in each
subcontract involving the use of hazardous materials or operations. Compliance
with the provisions of this clause by subcontractors will be the responsibility
of the Contractor.
H.3 HUMAN SUBJECTS (NIH 3085) (JUL 1986)
It is hereby understood and agreed that research involving human subjects
shall not be conducted under this contract, and that no material developed,
modified, or delivered by or to the Government under this contract, or any
subsequent modification of such material, will be used by the Contractor or
made available by the Contractor for use by anyone other than the Government,
for experimental or therapeutic use involving humans without the prior written
approval of the Contracting Officer.
H.4 SALARY RATE LIMITATIONS LEGISLATION (NIH 3102) (OCT 1993)
(a) Pursuant to the Public Law(s) cited in paragraph b., below, no NIH
Fiscal Year funds may be used to pay the direct salary of an individual through
this contract at a rate in excess of the applicable amount shown for the fiscal
year covered. Direct salary is exclusive of overhead, fringe benefits, and
general and administrative expenses. The per year salary rate limit also
applies to individuals proposed under subcontracts. If this is a multi-year
contract, it may be subject to unilateral modifications by the Government if an
individual's salary rate exceeds any salary rate ceiling established in future
DHHS appropriation acts.
H-2
<PAGE> 21
NO1-HD-6-3259 Section H
<TABLE>
<CAPTION>
(b) Public Law No. Fiscal Year Dollar Amount of
Salary Limitation
<S> <C> <C>
104-91 1996 $125,000
</TABLE>
H.5 ANIMAL WELFARE ASSURANCE (NIH 3200) (JUN 1993)
The Contractor shall obtain, prior to the start of any work under this
contract, an approved Animal Welfare Assurance from the Office of Protection
from Research Risks (OPRR), Office of the Director, NIH, as required by
Section I-43-30 of the Public Health Service Policy on Humane Care and Use of
Laboratory Animals. The Contractor shall maintain such assurance for the
duration of this contract, and any subcontractors performing work under this
contract involving the use of animals shall also obtain and maintain an
approved Animal Welfare Assurance.
H.6 ACKNOWLEDGEMENT OF SUPPORT (NIH 3480) (FEB 1992)
The contractor shall acknowledge the support of the National Institutes of
Health whenever publicizing the work under this contract in any media by
including an acknowledgement substantially as follows:
This project has been funded in whole or in part with Federal
funds from the National Institute of Child Health and Human
Development, National Institutes of Health, under Contract Number
NO1-HD-6-3259.
H-3
<PAGE> 22
NO1-HD-6-3259 Section I
PART II - CONTRACT CLAUSES
SECTION I - CONTRACT CLAUSES
----------------------------
I.1 CONTRACT CLAUSES (NIH 3105B) (MAR 1988)
The clauses incorporated in this contract are formatted for the award of a
Cost Plus Fixed Fee-Term contract with a commercial organization.
I.2 CLAUSES INCORPORATED IN FULL TEXT (NIH 3110) (JUL 1986)
The following National Institutes of Health clauses are incorporated in
full text and included as attachments listed in Section J:
NIH(RC)-1 JUN 1992 Invoice/Financing Request Instructions
for NIH Cost-Reimbursement Type Contracts
NIH(RC)-7 APR 1984 Procurement of Certain Equipment
(OMB Bulletin 81-16)
I.3 NOTICE LISTING CONTRACT CLAUSES INCORPORATED BY REFERENCE
The following contract clauses pertinent to this section are hereby
incorporated by reference (by Citation Number, Title, and Date) in accordance
with the clause at FAR "52.252-2 CLAUSES INCORPORATED BY REFERENCE (JUN 1988)"
in Section I of this contract.
<TABLE>
<CAPTION>
NUMBER TITLE DATE
<S> <C> <C>
FEDERAL ACQUISITION REGULATION (48 CFR Chapter 1)
52.203-3 GRATUITIES APR 1984
52.203-5 COVENANT AGAINST CONTINGENT FEES APR 1984
52.203-6 RESTRICTIONS ON SUBCONTRACTOR SALES TO JUL 1995
THE GOVERNMENT
52.203-7 ANTI-KICKBACK PROCEDURES JUL 1995
52.203-10 PRICE OR FEE ADJUSTMENT FOR ILLEGAL OR SEP 1990
IMPROPER ACTIVITIES
52.203-12 LIMITATION ON PAYMENTS TO INFLUENCE JAN 1990
CERTAIN FEDERAL TRANSACTIONS
52.204-4 PRINTING/COPYING DOUBLE-SIDED ON MAY 1995
RECYCLED PAPER
52.209-6 PROTECTING THE GOVERNMENT'S INTEREST AUG 1995
WHEN SUBCONTRACTING WITH CONTRACTOR'S
</TABLE>
I-1
<PAGE> 23
NO1-HD-6-3259 Section I
<TABLE>
<S> <C>
DEBARRED, SUSPENDED, OR PROPOSED FOR DEBARMENT
52.215-2 AUDIT AND RECORDS--NEGOTIATION OCT 1995
52.215-31 WAIVER OF FACILITIES CAPITAL COST OF SEP 1987
MONEY
52.215-33 ORDER OF PRECEDENCE JAN 1986
52.216-7 ALLOWABLE COST AND PAYMENT JUL 1991
52.216-8 FIXED-FEE APR 1984
52.219-8 UTILIZATION OF SMALL, SMALL OCT 1995
DISADVANTAGED BUSINESS AND WOMEN-OWNED
SMALL BUSINESS CONCERNS
52.222-3 CONVICT LABOR APR 1984
52.222-26 EQUAL OPPORTUNITY APR 1984
52.222-28 EQUAL OPPORTUNITY PREAWARD CLEARANCE OF APR 1984
SUBCONTRACTS
52.222-35 AFFIRMATIVE ACTION FOR SPECIAL DISABLED APR 1984
AND VIETNAM ERA VETERANS
52.222-36 AFFIRMATIVE ACTION FOR HANDICAPPED APR 1984
WORKERS
52.222-37 EMPLOYMENT REPORTS ON SPECIAL DISABLED JAN 1988
VETERANS AND VETERANS OF THE VIETNAM ERA
52.223-2 CLEAN AIR AND WATER APR 1984
52.223-6 DRUG-FREE WORKPLACE JUL 1990
52.225-11 RESTRICTIONS ON CERTAIN FOREIGN MAY 1992
PURCHASES
52.227-1 AUTHORIZATION AND CONSENT JUL 1995
ALTERNATE I (APR 1984)
52.227-2 NOTICE AND ASSISTANCE CONCERNING PATENT APR 1984
AND COPYRIGHT INFRINGEMENT
52.227-11 PATENT RIGHTS -- RETENTION BY THE JUN 1989
CONTRACTOR (SHORT FORM)
NOTE: In accordance with FAR 27.303(a)(2) paragraph (f) is modified to
include the requirements in FAR 27.303 (a)(2)(i) thru (iv). The
frequency of reporting in (i) is annual.
52.227-14 RIGHTS IN DATA--GENERAL JUN 1987
52.227-16 ADDITIONAL DATA REQUIREMENTS JUN 1987
52.232-9 LIMITATION ON WITHHOLDING OF PAYMENTS APR 1984
52.232-17 INTEREST JUN 1996
52.232-22 LIMITATION OF FUNDS APR 1984
52.232-23 ASSIGNMENT OF CLAIMS JAN 1986
52.232-25 PROMPT PAYMENT MAR 1994
52.232-28 ELECTRONIC FUNDS TRANSFER PAYMENT METHOD APR 1989
52.233-1 DISPUTES OCT 1995
52.233-3 PROTEST AFTER AWARD OCT 1995
ALTERNATE I (JUN 1985)
52.242-1 NOTICE OF INTENT TO DISALLOW COSTS APR 1984
52.242-3 PENALTIES FOR UNALLOWABLE COSTS OCT 1995
52.242-13 BANKRUPTCY JUL 1995
52.243-2 CHANGES--COST REIMBURSEMENT AUG 1987
ALTERNATE V (APR 1984)
52.244-2 SUBCONTRACTS (COST-REIMBURSEMENT AND MAR 1996
LETTER CONTRACTS)
52.244-5 COMPETITION IN SUBCONTRACTING JAN 1996
52.245-5 GOVERNMENT PROPERTY (COST-REIMBURSEMENT, JAN 1986
</TABLE>
I-2
<PAGE> 24
NO1-HD-6-3259 Section I
<TABLE>
<S> <C> <C>
TIME AND MATERIALS, OR LABOR HOUR
CONTRACTS)
52.245-19 GOVERNMENT PROPERTY FURNISHED "AS IS" APR 1984
52.246-23 LIMITATION OF LIABILITY APR 1984
52.246-25 LIMITATION OF LIABILITY--SERVICES APR 1984
52.249-6 TERMINATION (COST-REIMBURSEMENT) MAY 1986
52.249-14 EXCUSABLE DELAYS APR 1984
52.253-1 COMPUTER GENERATED FORMS JAN 1991
HEALTH AND HUMAN SERVICES ACQUISITION REGULATION
(48 CFR Chapter 3) CLAUSES:
HHSAR NUMBER TITLE DATE
352.202-1 DEFINITIONS APR 1984
ALTERNATE I (APR 1984)
352.228-7 INSURANCE--LIABILITY TO THIRD PERSONS DEC 1991
352.232-9 WITHHOLDING OF CONTRACT PAYMENTS APR 1984
352.233-70 LITIGATION AND CLAIMS APR 1984
352.242-71 FINAL DECISIONS ON AUDIT FINDINGS APR 1984
352.270-7 PAPERWORK REDUCTION ACT APR 1984
PUBLIC HEALTH SERVICES ACQUISITION REGULATIONS
(48 CFR Chapter 3, Appendix A) CLAUSES:
</TABLE>
<TABLE>
<CAPTION>
PHSAR NUMBER TITLE DATE
<S> <C> <C>
352.280-2 (b) CARE OF LIVE VERTEBRATE ANIMALS OCT 1986
</TABLE>
I.4 52.203-9 REQUIREMENT FOR CERTIFICATE OF PROCUREMENT
INTEGRITY-MODIFICATION (SEP 1995)
(a) Definitions. The definitions set forth in FAR 3.104-4 are hereby
incorporated in this clause.
(b) The Contractor agrees that it will execute the certification set
forth in paragraph (c) of this clause when requested by the Contracting
Officer in connection with the execution of any modification of this contract.
(c) Certification. As required in paragraph (b) of this clause, the
officer or employee responsible for the modification proposal shall execute the
following certification. The certification in paragraph (c)(2) of this
clause is not required for a modification which procures commercial items.
CERTIFICATE OF PROCUREMENT INTEGRITY--MODIFICATION (NOV 1990)
(1) I, ___________________________________________________________ [Name
of certifier] am the officer or employee responsible for the
preparation of this modification proposal and hereby certify that, to
the best of my knowledge and belief,
I-3
<PAGE> 25
NO1-HD-6-3259 Section I
with the exception of any information described in this certification,
I have no information concerning a violation or possible violation of
subsection 27(a), (b), (d), or (f) of the Office of Federal
Procurement Policy Act, as amended * (41 U.S.C. 423), (hereinafter
referred to as "the Act"), as implemented in the FAR, occurring during
the conduct of this procurement (contract and modification number).
(2) As required by subsection 27(e)(1)(B) of the Act, I further certify
that to the best of my knowledge and belief, each officer, employee,
agent, representative, and consultant of
____________________________________ [Name of Offeror] who has
participated personally and substantially in the preparation or
submission of this proposal has certified that he or she is familiar
with, and will comply with, the requirements of subsection 27(a) of
the Act, as implemented in the FAR, and will report immediately to me
any information concerning a violation or possible violation of
subsections 27(a), (b), (d), or (f) of the Act, as implemented in the
FAR, pertaining to this procurement.
(3) Violations or possible violations: (Continue on plain bond paper if
necessary and label Certificate of Procurement Integrity--Modification
(Continuation Sheet), ENTER NONE IF NONE EXISTS)
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
[Signature of the officer or employee responsible for the
modification proposal and date]
_______________________________________________________________________
[Typed name of the officer or employee responsible for the
modification proposal]
* Subsections 27(a), (b), and (d) are effective on December 1, 1990.
Subsection 27(f) is effective on June 1, 1991.
THIS CERTIFICATION CONCERNS A MATTER WITHIN THE JURISDICTION OF AN
AGENCY OF THE UNITED STATES AND THE MAKING OF A FALSE, FICTITIOUS, OR
FRAUDULENT CERTIFICATION MAY RENDER THE MAKER SUBJECT TO PROSECUTION
UNDER TITLE 18, UNITED STATES CODE, SECTION 1001.
(End of certification)
(d) In making the certification in paragraph (2) of the certificate,
the officer or employee of the competing Contractor responsible for the offer
or bid, may rely upon a one-time
I-4
<PAGE> 26
NO1-HD-6-3259 Section I
certification from each individual required to submit a certification to the
competing Contractor, supplemented by periodic training. These certifications
shall be obtained at the earliest possible date after an individual required to
certify begins employment or association with the contractor. If a contractor
decides to rely on a certification executed prior to the suspension of section
27 (i.e., prior to December 1, 1989), the Contractor shall ensure that an
individual who has so certified is notified that section 27 has been
reinstated. These certifications shall be maintained by the Contractor for a
period of 6 years from the date a certifying employee's employment with the
company ends or, for an agency, representative, or consultant, 6 years from the
date such individual ceases to act on behalf of the contractor.
(e) The certification required by paragraph (c) of this clause is a
material representation of fact upon which reliance will be placed in executing
this modification.
I.5 52.222-2 PAYMENT FOR OVERTIME PREMIUMS (JUL 1990)
(a) The use of overtime is authorized under this contract if the overtime
premium cost does not exceed $54,662 or the overtime premium is paid for work--
(1) Necessary to cope with emergencies such as those resulting from
accidents, natural disasters, breakdowns of production equipment, or occasional
production bottlenecks of a sporadic nature;
(2) By indirect-labor employees such as those performing duties in
connection with administration, protection, transportation, maintenance,
standby plant protection, operation of utilities, or accounting;
(3) To perform tests, industrial processes, laboratory procedures,
loading or unloading of transportation conveyances, and operations in flight or
afloat that are continuous in nature and cannot reasonably be interrupted or
completed otherwise; or
(4) That will result in lower overall costs to the Government.
(b) Any request for estimated overtime premiums that exceeds the amount
specified above shall include all estimated overtime for contract completion
and shall--
(1) Identify the work unit; e.g., department or section in which the
requested overtime will be used, together with present workload, staffing, and
other data of the affected unit sufficient to permit the Contracting Officer to
evaluate the necessity for the overtime;
(2) Demonstrate the effect that denial of the request will have on the
contract delivery or performance schedule;
I-5
<PAGE> 27
NO1-HD-6-3259 Section I
(3) Identify the extent to which approval of overtime would affect the
performance or payments in connection with other Government contracts, together
with identification of each affected contract; and
(4) Provide reasons why the required work cannot be performed by using
multishift operations or by employing additional personnel.
I.6 52.252-2 CLAUSES INCORPORATED BY REFERENCE (JUN 1988)
This Contract incorporates one or more clauses by reference, with the same
force and effect as if they were given in full text. Upon request, the
Contracting Officer will make their full text available.
I-6
<PAGE> 28
NO1-HD-6-3259 Section J
PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACHMENTS
SECTION J - LIST OF ATTACHMENTS
-------------------------------
J.1 LIST OF ATTACHMENTS (NIH 1365) (JUL 1986)
<TABLE>
<CAPTION>
Title Date Pages
<S> <C> <C>
a. Statement of Work N/A 4
b. Technical Reporting Requirements N/A 2
c. Financial Report of Individual 5/92 6
Project/Contract, NIH Form 2706
d. Invoice/Financing Request 6/92 4
Instructions for NIH
Cost-Reimbursement Type
Contracts, NIH(RC)-1
e. Procurement of Certain 4/84 1
Equipment, NIH(RC)-7
f. Government Furnished Property N/A 1
Schedule - II-A
</TABLE>
J-1
<PAGE> 29
Attachment J.1.a
STATEMENT OF WORK
A. General Description of the Required Objectives and Desired Results.
Independently and not as an agent of the Government, the Contractor shall
furnish all necessary services, qualified personnel, material equipment and
facilities not otherwise provided by the Government as needed to maintain and
operate a Biological Testing Facility for the exclusive use of the
Contraceptive Development Branch.
B. Technical Requirements.
Specifically, the contractor shall:
1. Maintain separate animal facilities for housing rodents, rabbits and
rhesus monkeys in compliance with all existing Federal, State and NIH
guidelines and with accreditation by AAALAC. The maximum anticipated
capacity for a given species at any one time is provided in Exhibit II.
2. Provide for individual caging of all animals during all experimental
studies except for those periods of cohabitation required for mating.
Monkeys may require paired caging at other times. Animal rooms for a given
species will be maintained with separate controls for light, temperature
and humidity.
3. Maintain a duly constituted animal care and use committee throughout the
contract period for the review of new experimental protocols and animal
health and welfare.
4. Submit articles including drugs, devices and delivery systems for
evaluation and assignment for testing by the Project Officer or procured by
the contractor from other sources as requested by the Project Officer.
5. Maintain an inventory of test articles containing dates of receipts of
materials, quantity used in test procedures and the amount on hand at any
given time. Contractor shall also keep a log of all distributions of test
articles including the sample size, date and recipient.
6. All materials submitted for testing shall remain the property of the
Government or the supplier to the Government. Disposition of materials
remaining after completion of testing shall be specified by the Project
Officer.
7. Establish and maintain laboratory procedures and controls to provide for
the safety of personnel and facilities; as any test material may, under
certain circumstances, be irritating, toxic or otherwise hazardous.
<PAGE> 30
8. Prepare test materials in appropriate vehicles for administration to
animals as specified by the Project Officer and/or in accordance with
specifications outlined in Exhibit III.
9. Provide space for the orderly storage of submissions at room
temperature, at approximately 4 degree C, -5 degree C, -20 degree C and at
-80 degree C.
10. Provide locked storage space with restricted access for controlled
substances.
11. Undertake any or all of the tests listed in Exhibit IV.
12. Administer test materials by conventional routes such as subcutaneous,
intravenous, intramuscular, intravaginal, oral and subdermal but be
prepared to undertake unusual routes of administration when necessary.
13. Observe and record changes in behavior and external organs, conduct
necropsies for obtaining specified tissues and organs, record organ
weights, preserve specified tissues for histological processing including
the preparation of stained sections for microscopic examination and obtain
photographs of animals, organs and tissues as part of the laboratory
record. Contractor shall also undertake gross and microscopic pathology of
tissues and organs using, where necessary, expert consultants (Board
Certified) in the field. Contractor shall also undertake surgical
procedures such as gonadectomies and those required for the placement of
drug delivery devices.
14. Obtain approval of the Project Officer for modifications of
experimental protocols.
15. Draw bloods at specified periods and prepare serum samples for
radioimmunoassay of sex steroids including estradiol, estrone, total
estrogens, testosterone, dihydrotestosterone, total androgens, progesterone
and protein hormones including FSH and LH. Radioimmunoassay of other drugs
may be required. The Government will furnish reagents for these assays
where they are not available commercially.
16. Provide for the experience and capability of developing new
radioimmunoassays including the production of antisera and radioligands
when necessary.
17. Undertake the assay of the clinical chemistries outlined in Exhibit V
for blood and urine samples in house or through consulting services.
18. Undertake preclinical drug safety studies in rodents and/or rabbits up
to 6 months in duration under GLP guidelines. Clinical chemistries,
urinalysis, hematology and full pathology may be required for these and for
other preclinical evaluation (Exhibits V, VI, VII, VIII). It is not
possible to predict the number of these studies which will be required
during the contract period.
<PAGE> 31
These studies may be undertaken in house or through consulting services in
part or in toto.
19. All tests and ancillary procedures employed by the contractor shall be
consistent with the goals of the program and the highest standards of
laboratory conduct and animal welfare.
20. Enter raw data into standard laboratory notebooks with provision for
permanent (original) and tear-out pages as outlined in Exhibit IX. Each
page will be signed and dated by the investigator and properly witnessed.
Each notebook will be numbered. No erasures in the laboratory notebook are
to be made; errors are to be lightly crossed out, correction added and the
correction initialed and dated by the investigator. Tear-out pages will be
available to the Project Officer on request. Raw data will be entered into
the NICHD data management system on a remote basis using
government-furnished equipment. Raw and/or summary data and analyses shall
be submitted to the Project Officer on a regular basis, usually weekly.
Contractor shall provide adequate space for a computer terminal and
ancillary equipment as well as the storage of all hard copies of data
sheets and notebooks.
21. Analyze raw data using conventional methods appropriate for the study.
Under certain circumstances contractor shall undertake specific statistical
procedures as requested by the Project Officer.
22. All data obtained under the contract shall remain the property of the
Government and/or the supplier of test materials and may not be published
or otherwise disseminated without specific permission from the Project
Officer.
23. Make available to the Government at all times the status of all tests
including all laboratory notebooks, data analyses, etc. Frequent
communication with the testing facility is essential to expeditious drug
evaluation and the contractor shall ensure that one of the individuals
under the contract with access to the status of all studies currently in
progress shall be available at all times.
24. Send frozen sera and/or tissues from study animals to other
laboratories for analyses upon request form the Project Officer.
25. Initiate the development and use of nonradiometric assays in the place
of conventional raioassays as they may become available and validated and
as appropriate.
26. Participate in the development of redesigned procedures for entering
data in the NICHD data management system.
27. Participate with CDB staff in the preparation of papers, reports and
articles for publication in scientific journals or for submission to the
Food and Drug Administration or other appropriate organizations. The
dissemination of
<PAGE> 32
data generated under the contract to other scientists is encouraged when
the proprietary or confidential nature of the information will not be
compromised. Accordingly, Project Officer approval is required for the
release of all data obtained under the contract.
28. Schedule all testing in an expeditious manner to ensure optimal
efficiency of operation for the entire program.
29. Provide adequate and appropriate organizational support for all aspects
of the testing program.
<PAGE> 33
EXHIBIT I
PERSONNEL REQUIREMENTS
<TABLE>
<CAPTION>
TITLE LEVEL OF EFFORT
<S> <C>
Principal Investigator* 100%
Manager, Bioassay* 100%
Manger, Immunoassay* 100%
Bioassay Technicians* 500%
Immunoassay Technicians* 300%
Small Animal Caretakers 200%
Veterinarian 12%
Primate Technicians 100%
Primate Animal Caretaker 100%
Quality Assurance Officer 10%
WEEKEND AND HOLIDAY PREMIUM TIME
Bioassay Technician 25%
Small Animal Caretaker 25%
Primate Technician 10%
Primate Animal Caretaker 25%
</TABLE>
*Individual must be assigned to the contract fulltime
<PAGE> 34
EXHIBIT II
MAXIMUM ANTICIPATED ANIMAL HOUSING
CAPACITY AND ANNUAL ANIMAL
REQUIREMENTS BY SPECIES
<TABLE>
<CAPTION>
SPECIES CAPACITY ANNUAL REQUIREMENT
<S> <C> <C>
Rats 2000* 6,000*
Rabbits 200** 600**
Rhesus monkeys 45 45
</TABLE>
*Assume 20% immature animals for budget purposes only.
**Assume 50% immature animals for budget purposes only.
<PAGE> 35
EXHIBIT III
Preparation, Handling and Administration of Test Materials
A. Precautions
Contractor will be expected to take all necessary and reasonable
precautions to protect employees handling test materials and will
supply suitable protective clothing and equipment. Employees will
follow procedures consistent with acceptable laboratory practice
designed to guard against personal injury.
B. Physical Properties
1. Whenever possible, physical data such as solubility, m.p.,
b.p., stability and potential hazards in use will be supplied
with the test material.
2. Compounds known or suspected to be unstable will be handled
strictly according to instructions supplied with the Compound
Submission Form.
C. Storage
Compounds received for testing shall be stored under refrigeration
(approximately 5 degrees C) unless otherwise specified.
Formulations of test materials remaining after medication will
usually be discarded but under unusual circumstances CDB may
request that contractors store these preparations. Storage of test
materials under nitrogen, under desiccation, and/or at low
temperatures (approximately -20 degrees C) may be required for some
test materials.
D. Preparation
1. Instructions for preparing test materials will usually be
provided on the Compound Submission Form.
2. Where compounds are not soluble in the recommended vehicle,
contractor will contact the Project Officer to discuss
alternative vehicles. When suspensions are to be employed,
every effort will be made to reduce particle size to a minimum
by non-destructive methods.
3. The following vehicles will usually be used in the formulation
of test compounds: distilled water, sterile saline, ethyl
alcohol, various buffers and various pH's, propylene glycol,
sesame oil, olive oil, corn oil, and aqueous suspending
vehicle (0.9% sodium chloride, 0.4% polysorbate 80, 0.5%
carboxymethylcellulose and 0.9% benzyl alcohol).
4. Dilution of the initial concentration of test material in
vehicle will be made so that the volume remains constant for
each dose level employed.
<PAGE> 36
EXHIBIT III - Page 2
5. Following the preparation of appropriate concentrations of the
test material for each dose level to be employed, all
solutions (suspensions) will be stored under refrigeration in
air-tight vessels. Test solutions will be brought to room
temperature prior to administration and returned to the
refrigerator immediately following medication.
6. Should test materials come out of solution following
refrigeration and remain so after attaining room
temperature, warming the preparation to redissolve the test
material will be permitted to the extent indicated on the
Compound Submission Form.
E. Administration
1. Test materials will be administered as indicated on the
Compound Submission Form. Ball-tipped needles in the largest
gauge (smallest diameter) consistent with the passage of
vehicle employed will be used for gavaging animals.
2. In addition to oral administration, medication by
intramuscular, intravenous, intraperitoneal, subcutaneous and
subdermal injections will be employed where specified.
3. Dilution of stock solutions (suspensions) will be made so that
the volume to be administered for each dose level remains
constant.
4. Separate syringes and needles will be used for each dose
level.
5. In general, the volume of vehicle containing test material
will be between 0.1 and 1.0 ml in rats, between 0.1 and 5.0
ml in rabbits and up to 10 ml in monkeys. The smallest
feasible volume in the ranges shown above will be utilized.
6. Control animals will ordinarily receive an equivalent volume
of the vehicle used for the test material.
7. In those tests requiring a comparison of the biological
activity of experimental substances with that of known
standards (determination of potency estimates, relative
potency, etc.), the standard employed will be administered in
the same vehicle as that of the test material with which a
comparison is being made.
F. Selection of Dose Levels
1. In general, dose levels will be selected which will provide
the data required most expeditiously.
2. Dose levels for each test substance will ordinarily be
specified on the Compound Submission Form.
<PAGE> 37
EXHIBIT III - Page 3
G. Drug Delivery Systems and Devices
1. Drug delivery systems and devices may require surgical
implantation at one or several locations of the body
surface or within body cavities.
2. Sterile technique, will be employed whenever skin
incisions or intrauterine placement are required.
<PAGE> 38
EXHIBIT IV
A. Antifertility- female
1. Broad screen (primary) - rat
2. Mode of action studies (secondary)
a. Antiovulatory - rat, rabbit, monkey
b. Luteolytic - rat, monkey
c. Postcoital (studies to determine effect on sperm transport,
fertilization, cleavage, zygote transport, intrauterine growth
and development, prenidatory changes and implantation - rat
and rabbit
3. Duration of antifertility activity - rat, rabbit, monkey
B. Antifertility - male
1. Broad screen (primary) - rat
2. Mode of action studies (secondary) - rat, rabbit, monkey
a. Effect on discrete stages of spermatogenesis
b. Effect on sperm maturation and storage
c. Effect on sperm transport
d. Effects on Leydig and Sertoli cells
e. Effect on sperm morphology and motility
f. Effect on capacitation
3. Endocrine profile
1. 1. Androgen - immature castrated male rat
a. Screen
b. Assay
c. Duration of action
2. Anti-androgen - immature castrated male rat
a. Screen
b. Assay
<PAGE> 39
EXHIBIT IV - Page 2
3. Estrogen - immature female rat and rabbit
a. Screen
b. Assay
c. Duration of activity
4. Anti-estrogen - rat and rabbit
a. Screen
b. Assay
5. Progestational (Clauberg and McGinty) - immature female rabbit
a. Screen
b. Assay
c. Duration of action
6. Progestational (pregnancy maintenance) - rat
a. MED
b. Optimal progestogen/estrogen ratio
7. Antiprogestational
a. (Clauberg) - immature female rabbit
b. (anti-McGinty) - immature female rabbit
8. Corticoid screen and assay - rat
a. Thymolytic
b. Glycogenic
c. Na/K excretion
d. Anti-inflammatory
9. Gonadotrophic - rat
10. Antigonadotrophic - rat
<PAGE> 40
EXHIBIT IV - Page 3
D. In vitro tests
1. Histamine release by mast cells
2. Spermicidal - rabbit
E. Radioimmunoassay - rat, rabbit, monkey, baboon, and human sera
1. Estradiol
2. Estrone
3. Total Estrogens
4. Progesterone
5. Testosterone and dihydrotestosterone
6. Total Androgens
7. FSH
8. LH
9. T3, T4
10. TSH
11. Other such as norethindrone, levonorgestrel, ethynylestradiol
(anti-body and tracer to be supplied by Government where
unavailable commercially).
F. Receptor Binding
1. Estrogen
2. Progesterone
3. Androgen
4. Glucocorticoid
<PAGE> 41
EXHIBIT V
Clinical Chemistries
Sufficient blood samples shall be obtained for hematology (Exhibit VII) to pro-
vide adequate serum or plasma for the following determinations:
Albumin
Albumin/globulin ratio
Alkaline phosphatase
BUN
Calcium ion
Chloride
Sodium
Potassium
Creatinine
Direct bilirubin
GGTP
Glucose
Iron
LDH
Magnesium
Inorganic phosphate
SGOT
SGPT
Total bilirubin
Total protein
Uric Acid
Lipid profile (total cholesterol, HDL, LDL,
VLDL, triglycerides, total lipids,
phospholipid)
T
4
T
3
<PAGE> 42
EXHIBIT VI
Urinalyses
Prior to study initiation and at specified intervals, overnight urine samples
will be collected from all animals. These samples will be collected prior to
administration of the test articles. Animals shall be fasted overnight and
housed in stainless steel metabolism cages. The following parameters will be
measured:
Appearance and color
pH
Specific gravity
Cells, cellular debris and crystals (microscopic)
Total protein
Glucose
Ketones
Bilirubin
Hemoglobin
Nitrite
Urobilinogen
<PAGE> 43
EXHIBIT VII
Hematology
Blood samples shall be collected prior to administration of test articles and
following the overnight fast for the collection of urine samples. The
following parameters shall be measured:
Hematocrit
Hemoglobin
Erythrocyte Count
Leucocyte Count
Reticulocyte Count
Platelet Count
Differential Count
Mean Corpuscular Volume
Mean Corpuscular Hemoglobin
pH
<PAGE> 44
EXHIBIT VIII
Necropsy and Histology
Gross finding shall be recorded for each animal which dies during the course
of the study and at unscheduled and scheduled sacrifice. The following organs
shall be cleaned of adherent connective tissue and fat and weighed: adrenals,
brain, heart, kidneys, liver, gonads, spleen, pituitary, thymus, thyroid,
uterus, seminal vesicles and ventral prostate. Absolute and relative
(organ/body weight ratio) shall be reported.
The following tissues or samples thereof shall be subjected to standard
histological processing and stained with hematoxylin and eosin:
adrenals
aorta
brain (medullary, cerebellar and cortical sections)
lungs (all lobes and mainstem bronchi)
mammry gland and skin
injection site
spleen
caecum
mid-colon
duodenum
esophagus
trachea
eyes
pancreas
stomach (glandular and nonglandular)
femur
pituitary (both lobes)
gonads*
epididymis (caudal and caput)
seminal vesicle
ventral prostate
uterus and uterocervical junction
cervix
vagina
cervical lymph node
urinary bladder
heart
kidney
ileum (and mesenteric lymph node)
thymus
jejunum
rectum
thyroid and parathyroid
liver
sciatic nerve and skeletal muscle
salivary glands and lymph node
spinal cord
sternum (bone marrow)
* a portion of the testes shall also be fixed in Helly's fluid for PAS
staining.
<PAGE> 45
EXHIBIT VIII - Page 2
Tissues shall be fixed in 10% neutral formalin unless otherwise specified by
the Project Officer. Standard histological procedures shall be employed for
dehydration and imbedding in paraffin. Sections will be cut at a thickness of
5 microns and stained with hematoxylin and eosin.
Histological processing and subsequent examination shall initially be limited
to any animals dying during the course of the study and all animals from the
control and high dose groups at sacrifice. Histopathological study shall be
extended to other dose groups for any tissues exhibiting drug-related
alterations at the high dose. Gonads and accessory reproductive organs shall
be processed and examined from all dose groups.
Slides, paraffin blocks and wet tissues shall be held by the Contractor for a
period of five years following completion of the contract.
<PAGE> 46
EXHIBIT IX
Reports and Data
A. In general, reports will be made in a manner and frequency
specified by CDB.
B. Contractor shall supply and maintain permanent type laboratory
notebooks exclusively for use in the CDB Testing Program.
1. Laboratory notebooks will have a hard cover and permanently
bound numbered pages each of which is followed by two (2)
tear-out pages. Data will be entered on the permanent page in
such a way as to be clearly reproduced on each of the two (2)
succeeding tear-out pages. Both copies of the notebook
tear-out sheets will be maintained on file by the contractor
and submitted to the CDB on request.
2. Each laboratory notebook will be numbered and contain
provisions for:
a. Title page
b. Table of contents
c. Index
3. Each numbered page of the laboratory notebook will contain
provisions for recording the following:
a. Identification of test and testing level
b. Test protocol
c. Date of initiation of test
d. Date of completion of test
e. Identification of test material by code number (CDB number
assigned to compound)
f. Identification of test material by name (for CDB use)
g. Identification of test material by structure (for CDB use)
h. Experimental data
i. Signature of senior investigator (so indicated) and date
of signing
j. Signature of witness (indicated as "read and understood by
witness") not directly involved in the test and date of
signing.
4. A diagonal line will be drawn across the unused portions of
each laboratory notebook page.
5. Erasures will not be made on any laboratory notebook page.
<PAGE> 47
EXHIBIT IX - Page 2
6. Corrections will be made by drawing a line through the
information to be changed and initialing and dating by the
senior investigator.
C. Analysis and summary of experimental data will be reduced to
writing in a report form approved by CDB.
D. Contractor will supply space for storage of laboratory notebooks,
data summary sheets and such other information as may be
considered confidential in locked files with access limited to
those personnel directly involved in the testing program.
E. CDB will have access to all information directly related to the
testing program including all bound laboratory notebooks at any
time.
F. Contractor will enter and analyze all data generated on Government
furnished data processing equipment.
<PAGE> 48
Attachment J.1.b
TECHNICAL REPORTING REQUIREMENTS
I. TECHNICAL REPORTS: In addition to those reports required by the terms
of this contract, the Contractor shall prepare and submit the
following reports during the period of performance of this contract.
Quarterly reports, final report/summary report and GLP study shall be
submitted to the Project Officer and Contracting Officer in the number
of copies and at the addresses shown below.
<TABLE>
<CAPTION>
Addresses No. Of Copies/Reports
--------- ---------------------
<S> <C>
Richard P. Blye, Ph.D. 3 Quarterly
Contraceptive Development Branch, NICHD 2 Final/Summary
National Institutes of Health 5 GLP Study Reports
Executive Building, Room 8B13
6100 Executive Blvd., MSC 7510
BETHESDA MD 20892-7510
Paul J. Duska, Contracting Officer 1 Quarterly
Contracts Management Branch, NICHD 1 Final/Summary
National Institutes of Health 1 GLP Study Report
Executive Building, Room 7A07
6100 Executive Blvd., MSC 7510
BETHESDA MD 20892-7510
</TABLE>
A. Quarterly Report:
A quarterly progress report shall be submitted within 30 days after
the reporting period. The quarterly report shall include the
following specific information.
1) A list of all compounds, drug delivery systems and devices
evaluated during the reporting period and the tests performed
on each. The location of the data generated for each
submission including identification of laboratory notebooks
and pages and the rows in each "Drug Directory."
2) Compound, delivery system and device inventory.
3) A description of the current protocols employed for all tests
and analytical procedures.
4) Animal inventory by species.
5) A discussion of all problems that have arisen during the
reporting period and their resolution.
<PAGE> 49
B. Final Report
A Comprehensive final report shall be submitted on or before the
expiration date of the contract. The final report shall contain all
of the information requested in the previous quarterly reports in
cumulative form. The work shall be described in detail including
particular attention to any modification of test protocols. The
final report shall also include summary data and analysis,
including a summary (not to exceed 200 words) of salient results
achieved during the performance of the contract.
C. GLP Study Reports
The contractor shall prepare and submit to the Project Officer five
(5) copies of audited final reports for all studies carried out
under GLP guidelines. These reports will conform to guidelines
contained in GLP regulations in effect at the time of preparation.
II. Laboratory Records: The contractor shall maintain laboratory
notebooks as outlined elsewhere. It is important that these
notebooks contain an accurate, up-to-date record of all
testing activities. Data should be entered in laboratory
notebooks on a daily basis and each page properly signed,
dated and witnessed. Copies of these notebook pages, as well
as copies of summary sheets containing summary data and
analysis shall be maintained by the contractor for submission
to the Project Officer on demand.
III. Computer-Based Data Storage and Analysis: The Contractor shall enter
data into "drug Directories" through the CDB PROPHET Data System on a
daily basis. The PROPHET System provides the principal means of access
to data generated under contract and minimizes the need for the
Government to store and maintain hard copies of laboratory notebook
pages and individual test result reports.
<PAGE> 50
Page 1 of 4
<TABLE>
<CAPTION>
====================================================================================================================================
NATIONAL INSTITUTES OF HEALTH PROJECT TITLE: "BIOLOGICAL TESTING FACILITY"
FINANCIAL REPORT OF INDIVIDUAL PROJECT/CONTRACT
- - ------------------------------------------------------------------------------------------------------------------------------------
NOTE: COMPLETE THIS FORM IN ACCORDANCE REPORTING PERIOD
WITH ACCOMPANYING INSTRUCTIONS.
- - ------------------------------------------------------------------------------------------------------------------------------------
LABOR HOURS CUMULATIVE
EXPENDITURE CATEGORY INCURRED COST INCURRED CUMULATIVE
AT END OF COST-CURRENT COST TO DATE
NEGOTIATED ACTUAL PRIOR PERIOD PERIOD (D+E)
- - ------------------------------------------------------------------------------------------------------------------------------------
A B C D E F
====================================================================================================================================
<S> <C>
A. DIRECT LABOR
Medical Center Cost Center
- - ------------------------------------------------------------------------------------------------------------------------------------
J. Reel, Ph.D. Principal Investigator 9,400
- - ------------------------------------------------------------------------------------------------------------------------------------
S. Hild-Petito, Ph.D. Mngr. Bioassay/Tox 9,400
- - ------------------------------------------------------------------------------------------------------------------------------------
J. Larner, Ph.D Mngr. Immuno/Biochem 9,400
- - ------------------------------------------------------------------------------------------------------------------------------------
D. Gropp BIO/TOX Technician 9,970
- - ------------------------------------------------------------------------------------------------------------------------------------
S. Propst BIO/TOX Technician 9,970
- - ------------------------------------------------------------------------------------------------------------------------------------
B. Till BIO/TOX Technician 9,970
- - ------------------------------------------------------------------------------------------------------------------------------------
E. Curreri BIO/TOX Technician 9,970
- - ------------------------------------------------------------------------------------------------------------------------------------
B. Hembry BIO/TOX Technician 9,400
- - ------------------------------------------------------------------------------------------------------------------------------------
R. Scott Immuno/Biochem Tech. 9,400
- - ------------------------------------------------------------------------------------------------------------------------------------
L. Radler Immuno/Biochem Tech. 9,400
- - ------------------------------------------------------------------------------------------------------------------------------------
J. Burgensob Immuno/Biochem Tech. 9,400
- - ------------------------------------------------------------------------------------------------------------------------------------
S. Gormley Sm. Animal Care Tech. 10,540
- - ------------------------------------------------------------------------------------------------------------------------------------
0. Saine Sm. Animal Care Tech. 10,540
- - ------------------------------------------------------------------------------------------------------------------------------------
L. Denenno Quality Assurance 470
- - ------------------------------------------------------------------------------------------------------------------------------------
Medical Center Director Labor Cost Total 126,760
- - ------------------------------------------------------------------------------------------------------------------------------------
DIRECT LABOR
Research Blvd. Cost Center
- - ------------------------------------------------------------------------------------------------------------------------------------
T. Moskal DVM Veterinarian 1,130
- - ------------------------------------------------------------------------------------------------------------------------------------
S. Harbauch BIO/TOX Technician 5,170
- - ------------------------------------------------------------------------------------------------------------------------------------
M. Sowers BIO/TOX Technician 5,170
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
==============================================================================================================
CONTRACT NO.: NO1-HD-6-3259 DATE OF REPORT:
- - --------------------------------------------------------------------------------------------------------------
CONTRACTOR NAME AND ADDRESS:
BIOQUAL, Inc.
9600 Medical Center Drive
ROCKVILLE, MD 20850-3300
- - --------------------------------------------------------------------------------------------------------------
ESTIMATED VARIANCE
EXPENDITURE CATEGORY ESTIMATED COST AT NEGOTIATED (OVER OR
COST TO COMPLETION CONTRACT UNDER)
COMPLETE (F+G) AMOUNT (I-H
- - --------------------------------------------------------------------------------------------------------------
G H I J
==============================================================================================================
<S> <C>
A. DIRECT LABOR
Medical Center Cost Center
- - --------------------------------------------------------------------------------------------------------------
J. Reel, Ph.D. Principal 530,536
- - --------------------------------------------------------------------------------------------------------------
S. Hild-Petito, Ph.D. Mngr. Bioassay/Tox 323,897
- - --------------------------------------------------------------------------------------------------------------
J. Larner, Ph.D Mngr. Immuno/Biochem 347,649
- - --------------------------------------------------------------------------------------------------------------
D. Gropp BIO/TOX Technician 204,574
- - --------------------------------------------------------------------------------------------------------------
S. Propst BIO/TOX Technician 146,156
- - --------------------------------------------------------------------------------------------------------------
B. Till BIO/TOX Technician 219,611
- - --------------------------------------------------------------------------------------------------------------
E. Curreri BIO/TOX Technician 167,755
- - --------------------------------------------------------------------------------------------------------------
B. Hembry BIO/TOX Technician 157,939
- - --------------------------------------------------------------------------------------------------------------
R. Scott Immuno/Biochem Tech. 183,166
- - --------------------------------------------------------------------------------------------------------------
L. Radler Immuno/Biochem Tech. 150,306
- - --------------------------------------------------------------------------------------------------------------
J. Burgensob Immuno/Biochem Tech. 184,296
- - --------------------------------------------------------------------------------------------------------------
S. Gormley Sm. Animal Care Tech. 109,107
- - --------------------------------------------------------------------------------------------------------------
0. Saine Sm. Animal Care Tech. 97,098
- - --------------------------------------------------------------------------------------------------------------
L. Denenno Quality Assurance 17,692
- - --------------------------------------------------------------------------------------------------------------
Medical Center Director Labor Cost Total 2,822,291
- - --------------------------------------------------------------------------------------------------------------
DIRECT LABOR
Research Blvd. Cost Center
- - --------------------------------------------------------------------------------------------------------------
T. Moskal DVM Veterinarian 47,627
- - --------------------------------------------------------------------------------------------------------------
S. Harbauch BIO/TOX Technician 123,811
- - --------------------------------------------------------------------------------------------------------------
M. Sowers BIO/TOX Technician 86,060
==============================================================================================================
</TABLE>
NIH 2706 (5/92)
<PAGE> 51
Page 2 of 4
<TABLE>
<CAPTION>
====================================================================================================================================
NATIONAL INSTITUTES OF HEALTH PROJECT TITLE: "BIOLOGICAL TESTING FACILITY"
FINANCIAL REPORT OF INDIVIDUAL PROJECT/CONTRACT
- - ------------------------------------------------------------------------------------------------------------------------------------
NOTE: COMPLETE THIS FORM IN ACCORDANCE REPORTING PERIOD
WITH ACCOMPANYING INSTRUCTIONS.
- - ------------------------------------------------------------------------------------------------------------------------------------
LABOR HOURS CUMULATIVE
EXPENDITURE CATEGORY INCURRED COST INCURRED CUMULATIVE
AT END OF COST-CURRENT COST TO DATE
NEGOTIATED ACTUAL PRIOR PERIOD PERIOD (D+E)
- - ------------------------------------------------------------------------------------------------------------------------------------
A B C D E F
====================================================================================================================================
<S> <C>
E. Jarvis Nonhuman Primare Care Tech. 11,880
- - ------------------------------------------------------------------------------------------------------------------------------------
Research Blvd. Direct Labor Care Total 23,350
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DIRECT LABOR 150,110
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
B. FRINGE BENEFITS
- - ------------------------------------------------------------------------------------------------------------------------------------
Med Center @ 41%
- - ------------------------------------------------------------------------------------------------------------------------------------
Research Blvd. @ 41%
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
TOTAL FRINGE BENEFITS
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
TOTAL DIRECT COSTS
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
C. OVERHEAD
- - ------------------------------------------------------------------------------------------------------------------------------------
Med Center @ 99% (DL+FR)
- - ------------------------------------------------------------------------------------------------------------------------------------
Research Blvd. @ 153% (DL+FR)
- - ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OVERHEAD
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
D. MATERIALS & SUPPLIES
- - ------------------------------------------------------------------------------------------------------------------------------------
Food & Bedding
- - ------------------------------------------------------------------------------------------------------------------------------------
Syringes, Needles, Inst.
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
===============================================================================================================
CONTRACT NO.: NO1-HD-6-3259 DATE OF REPORT:
- - ---------------------------------------------------------------------------------------------------------------
CONTRACTOR NAME AND ADDRESS:
BIOQUAL, Inc.
9600 Medical Center Drive
ROCKVILLE, MD 20850-3300
- - ---------------------------------------------------------------------------------------------------------------
ESTIMATED VARIANCE
EXPENDITURE CATEGORY ESTIMATED COST AT NEGOTIATED (OVER OR
COST TO COMPLETION CONTRACT UNDER)
COMPLETE (F+G) AMOUNT (I-H
- - ---------------------------------------------------------------------------------------------------------------
G H I J
===============================================================================================================
<S> <C>
E. Jarvis Nonhuman Primare Care Tech. 137,564
- - ---------------------------------------------------------------------------------------------------------------
Research Blvd. Direct Labor Care Total 395,061
- - ---------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------
TOTAL DIRECT LABOR 3,217,353
- - ---------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------
B. FRINGE BENEFITS
- - ---------------------------------------------------------------------------------------------------------------
Med Center @ 41% 1,157,139
- - ---------------------------------------------------------------------------------------------------------------
Research Blvd. @ 41% 161,975
- - ---------------------------------------------------------------------------------------------------------------
TOTAL FRINGE BENEFITS 1,319,115
- - ---------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------
TOTAL DIRECT COSTS 4,536,467
- - ---------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------
C. OVERHEAD
- - ---------------------------------------------------------------------------------------------------------------
Med Center @ 99% (DL+FR) 3,939,637
- - ---------------------------------------------------------------------------------------------------------------
Research Blvd. @ 153% (DL+FR) 852,265
- - ---------------------------------------------------------------------------------------------------------------
TOTAL OVERHEAD 4,791,902
- - ---------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------
D. MATERIALS & SUPPLIES
- - ---------------------------------------------------------------------------------------------------------------
Food & Bedding 10,725
- - ---------------------------------------------------------------------------------------------------------------
Syringes, Needles, Inst. 42,900
===============================================================================================================
</TABLE>
NIH 2706 (5/92)
<PAGE> 52
Page 3 of 4
<TABLE>
<CAPTION>
====================================================================================================================================
NATIONAL INSTITUTES OF HEALTH PROJECT TITLE: "BIOLOGICAL TESTING FACILITY"
FINANCIAL REPORT OF INDIVIDUAL PROJECT/CONTRACT
- - ------------------------------------------------------------------------------------------------------------------------------------
NOTE: COMPLETE THIS FORM IN ACCORDANCE REPORTING PERIOD
WITH ACCOMPANYING INSTRUCTIONS.
- - ------------------------------------------------------------------------------------------------------------------------------------
LABOR HOURS CUMULATIVE
EXPENDITURE CATEGORY INCURRED COST INCURRED CUMULATIVE
AT END OF COST-CURRENT COST TO DATE
NEGOTIATED ACTUAL PRIOR PERIOD PERIOD (D+E)
- - ------------------------------------------------------------------------------------------------------------------------------------
A B C D E F
====================================================================================================================================
<S> <C>
Glassware/Vialsn Primare Care Tech.
- - ------------------------------------------------------------------------------------------------------------------------------------
Chemicals & Reagents
- - ------------------------------------------------------------------------------------------------------------------------------------
Histology/Photography
- - ------------------------------------------------------------------------------------------------------------------------------------
RIA
- - ------------------------------------------------------------------------------------------------------------------------------------
Clinical Chem
- - ------------------------------------------------------------------------------------------------------------------------------------
Cleaning/Prot Cloth
- - ------------------------------------------------------------------------------------------------------------------------------------
Disposable Lab Supplies
- - ------------------------------------------------------------------------------------------------------------------------------------
TOTAL MATERIALS & SUPPLIES
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
E. OTHER DIRECT COSTS
- - ------------------------------------------------------------------------------------------------------------------------------------
Transportation
- - ------------------------------------------------------------------------------------------------------------------------------------
Animals
- - ------------------------------------------------------------------------------------------------------------------------------------
Overtime Premium
- - ------------------------------------------------------------------------------------------------------------------------------------
Consultants/Contractors
Pathology
- - ------------------------------------------------------------------------------------------------------------------------------------
Clinical Chemistry
- - ------------------------------------------------------------------------------------------------------------------------------------
Toxicology
- - ------------------------------------------------------------------------------------------------------------------------------------
Equipment & Warranties
- - ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER DIRECT COSTS
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
==============================================================================================================
CONTRACT NO.: NO1-HD-6-3259 DATE OF REPORT:
- - --------------------------------------------------------------------------------------------------------------
CONTRACTOR NAME AND ADDRESS:
BIOQUAL, Inc.
9600 Medical Center Drive
ROCKVILLE, MD 20850-3300
- - --------------------------------------------------------------------------------------------------------------
ESTIMATED VARIANCE
EXPENDITURE CATEGORY ESTIMATED COST AT NEGOTIATED (OVER OR
COST TO COMPLETION CONTRACT UNDER)
COMPLETE (F+G) AMOUNT (I-H
- - --------------------------------------------------------------------------------------------------------------
A G H I J
==============================================================================================================
<S> <C>
Glassware/Vialsn Primare Care Tech. 32,175
- - --------------------------------------------------------------------------------------------------------------
Chemicals & Reagents 21,460
- - --------------------------------------------------------------------------------------------------------------
Histology/Photography 21,450
- - --------------------------------------------------------------------------------------------------------------
RIA 241,311
- - --------------------------------------------------------------------------------------------------------------
Clinical Chem 10,725
- - --------------------------------------------------------------------------------------------------------------
Cleaning/Prot Cloth 80,437
- - --------------------------------------------------------------------------------------------------------------
Disposable Lab Supplies 85,799
- - --------------------------------------------------------------------------------------------------------------
TOTAL MATERIALS & SUPPLIES 546,972
- - --------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------
E. OTHER DIRECT COSTS
- - --------------------------------------------------------------------------------------------------------------
Transportation 2,500
- - --------------------------------------------------------------------------------------------------------------
Animals 500,000
- - --------------------------------------------------------------------------------------------------------------
Overtime Premium 54,662
- - --------------------------------------------------------------------------------------------------------------
Consultants/Contractors
Pathology 50,000
- - --------------------------------------------------------------------------------------------------------------
Clinical Chemistry 15,000
- - --------------------------------------------------------------------------------------------------------------
Toxicology 1,000,000
- - --------------------------------------------------------------------------------------------------------------
Equipment & Warranties 75,000
- - --------------------------------------------------------------------------------------------------------------
TOTAL OTHER DIRECT COSTS 1,697,162
- - --------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------
</TABLE>
NIH 2706 (5/92)
<PAGE> 53
Page 4 of 4
<TABLE>
<CAPTION>
====================================================================================================================================
NATIONAL INSTITUTES OF HEALTH PROJECT TITLE: "BIOLOGICAL TESTING FACILITY"
FINANCIAL REPORT OF INDIVIDUAL PROJECT/CONTRACT
- - ------------------------------------------------------------------------------------------------------------------------------------
NOTE: COMPLETE THIS FORM IN ACCORDANCE REPORTING PERIOD
WITH ACCOMPANYING INSTRUCTIONS.
- - ------------------------------------------------------------------------------------------------------------------------------------
LABOR HOURS CUMULATIVE
EXPENDITURE CATEGORY INCURRED COST INCURRED CUMULATIVE
AT END OF COST-CURRENT COST TO DATE
NEGOTIATED ACTUAL PRIOR PERIOD PERIOD (D+E)
- - ------------------------------------------------------------------------------------------------------------------------------------
A B C D E F
====================================================================================================================================
<S> <C>
F. G&A BASE
- - ------------------------------------------------------------------------------------------------------------------------------------
G&A @ 22.4%
- - ------------------------------------------------------------------------------------------------------------------------------------
TOTAL COSTS
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
G. FEE
- - ------------------------------------------------------------------------------------------------------------------------------------
TOTAL COSTS PLUS FIXED FEE
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
==============================================================================================================
CONTRACT NO.: NO1-HD-6-3259 DATE OF REPORT:
- - --------------------------------------------------------------------------------------------------------------
CONTRACTOR NAME AND ADDRESS:
BIOQUAL, Inc.
9600 Medical Center Drive
ROCKVILLE, MD 20850-3300
- - --------------------------------------------------------------------------------------------------------------
ESTIMATED VARIANCE
EXPENDITURE CATEGORY ESTIMATED COST AT NEGOTIATED (OVER OR
COST TO COMPLETION CONTRACT UNDER)
COMPLETE (F+G) AMOUNT (I-H
- - --------------------------------------------------------------------------------------------------------------
G H I J
==============================================================================================================
<S> <C>
F. G&A BASE 11,572,502
- - --------------------------------------------------------------------------------------------------------------
G&A @ 22.4% 2,592,240
- - --------------------------------------------------------------------------------------------------------------
TOTAL COSTS 14,164,742
- - --------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------
G. FEE 851,149
- - --------------------------------------------------------------------------------------------------------------
TOTAL COSTS PLUS FIXED FEE 15,015,891
- - --------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------
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==============================================================================================================
</TABLE>
NIH 2706 (5/92)
<PAGE> 54
(6) INPATIENT CARE. Costs associated with a subject while occupying a bed in a
patient care setting. It normally includes both routine and ancillary costs.
(7) OUTPATIENT CARE. Costs associated with a subject while not occupying a bed.
It normally includes ancillary costs only.
(8) TRAVEL. Includes all direct costs of travel, including transportation,
subsistence and miscellaneous expenses. Travel for staff and consultants shall
be shown separately. Identify foreign and domestic travel separately. If
required by the contract, the following information shall be submitted: (i)
Name of traveler and purpose of trip: (ii) Place of departure, destination and
return, including time and dates; and (iii) Total cost of trip.
(9) CONSULTANT FEE. Fees paid to consultant. Identify each consultant with
effort expended billing rate and amount billed.
(10) PREMIUM PAY. Includes the amount of salaries and wages over and above the
basic rate of pay.
(11) SUBCONTRACTS. List each subcontract by name and amount billed.
(12) OTHER COSTS. Includes a number of separate expenditure categories for
which the Government does not require individual line item reporting. It may
include some of the above categories.
(13) OVERHEAD/INDIRECT COSTS. Identify the cost base indirect cost rate and
amount billed for each indirect cost category.
(14) GENERAL AND ADMINISTRATIVE EXPENSE. Cite the rate and the base. In the
case of nonprofit organizations, this item will usually be included in the
indirect cost.
(15) FEE. If any cite the fee earned.
(16) TOTAL COSTS TO THE GOVERNMENT.
PREPARATION INSTRUCTIONS
These instructions are keyed to the columns on Form NIH 2706.
COLUMN A--EXPENDITURE CATEGORY. Enter in column A the expenditure categories
required by the contract.
COLUMN B--PERCENTAGE OF EFFORT/HOURS FUNDED. Enter in column B the percentage of
effort or number of hours agreed to during contract negotiations for each labor
category listed in column A.
COLUMN C--PERCENTAGE OF EFFORT/HOURS-ACTUAL. The Contractor will enter the
cumulative percentage of effort or number of hours worked by each employee or
group of employees listed in Column A.
COLUMN D--CUMULATIVE INCURRED COST AT END OF PRIOR PERIOD. This column should
show the cumulative incurred costs up to the end of the prior reporting period.
This column will be blank at the time of the submission of the initial report.
COLUMN E--INCURRED COST-CURRENT PERIOD. The Contractor should enter the costs
which were incurred during the current period.
COLUMN F--CUMULATIVE INCURRED COST TO DATE. The Contractor should enter the
combined total of Columns D and E.
COLUMN G--ESTIMATED COST TO COMPLETE. Entries need only be made when the
Contractor estimates that a particular expenditure category will vary from the
amount funded. Realistic estimates are essential.
COLUMN H--ESTIMATED COSTS AT COMPLETION. No entry is required in this column
unless an entry is made in Column G.
<PAGE> 55
COLUMN I -- FUNDED CONTRACT AMOUNT. Enter in this column the costs agreed to
during contract negotiations for all expenditure categories listed in Column A.
COLUMN J - VARIANCE (OVER OR UNDER). This column need not be filled in when
Column H is blank. When entries have been made in Column H this column should
show the difference between the estimated costs at completion (Column H) and
funded costs (Column I). When a line item varies by plus or minus 10%, i.e.,
the percentage arrived at by dividing Column J by Column I, an explanation of
the variance should be submitted. In the case of an overrun (net negative
variance), this submission shall not be deemed as notice under the Limitation
of Cost (Funds) clause of the contract.
MODIFICATIONS. Any modification in the amount funded for an item since the
preceding report should be listed in the appropriate cost category.
EXPENDITURES NOT FUNDED. An expenditure for an item for which no amount was
funded (e.g., at the discretion of the Contractor in performance of its
contract) should be listed in the appropriate cost category and all columns
filled in except for I. Column J will of course show a 100% variance and will
be explained along with those identified under J above.
<PAGE> 56
Attachment J.1.d
INVOICE/FINANCING REQUEST INSTRUCTION FOR NIH COST-REIMBURSEMENT TYPE CONTRACTS
GENERAL: The contractor shall submit claims for reimbursement in the manner
and format described herein and as illustrated in the sample invoice/financing
requests.
FORMAT: Standard Form 1034, "Public Voucher for Purchases and Services Other
Than Personal"; and Standard Form 1035, "Public Voucher for Purchase and
Services Other Than Personal -- Continuation Sheet", or reproduced copies of
such forms marked ORIGINAL should be used to submit claims for reimbursement.
In lieu of SF-1034 and SF-1035, claims may be submitted on the payee's
letter-head or self-designed form provided that it contains the information
shown on the sample invoice/fancing request.
NUMBER OF COPIES: As indicated in the Invoice Submission clause in the
contract.
FREQUENCY: Invoices/financing requests submitted in accordance with the
payment clause shall be submitted monthly unless otherwise authorized by the
contracting officers.
COST INCURRENCE PERIOD: Costs incurred must be within the contract performance
period or covered by precontract cost provisions.
BILLING OF COSTS INCURRED: If billed costs include: (1) Costs of a prior
billing period, but not previously billed, or (2) costs incurred during the
contract period and claimed after the contract period has expired, the amount
and month(s) in which such costs were incurred shall be cited.
CONTRACTOR'S FISCAL YEAR: Invoice/financing requests shall be prepared in such
a manner that costs claimed can be identified with the contractor's fiscal
year.
CURRENCY: All NIH contracts are expressed in United States dollars. Where
expenditures are made in a currency other than United States dollars, billings
on the contract shall be expressed, and reimbursement by the United States
Government shall be made, in that other currency at amounts coincident which
actual costs incurred. Currency fluctuations may not be a basis of gain or loss
to the contractor. Notwithstanding the above, the total of all invoices paid
under this contract may not exceed the United States dollars authorized.
COSTS REQUIRING PRIOR APPROVAL: Costs requiring the contracting officer's
approval which are not set forth in an advance understanding in the contract
shall be so identified and reference the Contracting Officer's Authorization
(COA) number.
INVOICE/FINANCING REQUEST IDENTIFICATION: Each invoice/financing request
shall be identified as either:
(a) INTERIM INVOICE/CONTRACT FINANCING REQUEST - There are interim
payment requests submitted during the contract performance
period.
(b) COMPLETION INVOICE - The completion invoice is a final invoice
which is submitted promptly upon completion of the work, but
no later than one year from the contract completion date. The
completion invoice should be submitted when all costs (except
for finalization of indirect cost rates) have been assigned
to the contract and all performance provisions have been
completed.
(c) FINAL INVOICE - A revised final invoice may be required after
the amounts owed have been settled between the government and
the Contractor (e.g., final indirect cost rates and
resolution of all suspensions and audit exceptions).
PREPARATION AND ITEMIZATION OF THE INVOICE/FINANCING REQUEST: The Contractor
shall furnish the information set forth in the explanatory notes below. These
notes are keyed to the entries on the sample invoice/financing request.
(a) PAYOR'S NAME AND ADDRESS - The paying office and address,
identified in the Invoice Submission clause of the contract,
shall be entered on all copies of the invoice/financing
request.
(b) INVOICE/FINANCING REQUEST NUMBER - Insert the appropriate
serial number of the invoice/financing request.
(c) DATE INVOICE/FINANCING REQUEST PREPARED - Insert the date the
invoice/financing request is prepared.
1
<PAGE> 57
(d) CONTRACT NUMBER AND DATEUP - Insert the contract number and the date of
the contract.
(e) PAYEE'S NAME AND ADDRESS - Show the Contractor's name (as it appears
in the contract), correct address, and the title and phone number of
the responsible official to whom payment is to be sent. When an
approved assignment has been made by the contractor, or a different
payee has been designated, then insert the name and address of the
payee instead of the contractor.
(f) TOTAL ESTIMATED COST OF CONTRACT - Insert the total estimated cost of
the contract, exclusive of fixed-fee. For incrementally funded
contracts, enter the amount currently obligated and available for
payment.
(g) TOTAL FIXED-FEE - Insert the total fixed-fee (where applicable).
(h) BILLING PERIOD - Insert the beginning and ending dates (month, day,
and year) of the period in which costs were incurred and for which
reimbursement is claimed.
(i) AMOUNT BILLED FOR CURRENT PERIOD - Insert the amount billed for the
major cost element, adjustments, and adjusted amounts for the
period.
(j) CUMULATIVE AMOUNT FROM INCEPTION TO DATE OF THIS BILLING - Insert the
cumulative amounts billed for the major cost elements and adjusted
amounts claimed during this contract.
(k) DIRECT COSTS - Insert the major cost elements. For each element,
consider the application of the paragraph entitled "Costs Requiring
Prior Approval" on page 1 of these instructions.
(1) DIRECT LABOR - This consists of salaries and wages paid
(or accrued) for direct performance of the contract.
(2) FRINGE BENEFITS This represents fringe benefits
applicable to direct labor and billed as a direct cost.
Fringe benefits included in indirect costs should not be
identified here.
(3) ACCOUNTABLE PERSONAL PROPERTY - This category of cost
includes permanent research equipment and general purpose
equipment having a unit acquisition cost of $1,000 or more
and having an expected service life of more than two
years, and sensitive property regardless of cost (see the
DHHS Contractor's Guide for Control of Government
Property). Show permanent research equipment separate
from general purpose equipment. Prepare and attach Form
HHS-565, "Report of Accountable Property", in
accordance with the following instructions:
List each item for which reimbursement is
requested. A reference shall be made to the
following (as applicable):
(A) The item number for the specific
piece of equipment listed in the
Property Schedule;
(B) The Contracting Officer's
Authorization letter and number, if
the equipment is not covered by the
Property Schedule, or;
(C) Be preceded by an asterisk (*) if
the equipment is below the approval
level.
Further itemization of invoices/financing
requests shall only be required for items having
specific limitations set forth in the contract.
(4) MATERIALS AND SUPPLIES - This category includes equipment
with unit costs of less than $1,000 or an expected service
life of two years or less, and consumable material and
supplies regardless of amount.
(5) PREMIUM PAY - This is remuneration in excess of the basic
hourly rate.
2
<PAGE> 58
(6) CONSULTANT FEE - Fees paid to consultants. Identify
consultant by name or category as set forth in the
contract's advance understanding or in the COA letter, as
well as the effort (i.e., number of hours, days, etc.)
and rate being billed.
(7) TRAVEL - Foreign travel is travel outside of Canada, the
United States and its territories and possessions.
However, for an organization located outside Canada,
United States and its territories and possessions, foreign
travel means travel outside that country. Foreign travel
should be billed separately from domestic travel.
(8) SUBCONTRACT COSTS - List subcontractor(s) by name and
amount billed.
(9) OTHER - List all other direct costs in total unless
exceeding $1,000 in amount. If over $1,000 list cost
elements and dollar amounts separately. If the contract
contains restrictions on any cost element, that cost
element should be listed separately.
(l) COST OF MONEY (COM) - Cite the COM factor and base in effect
during the time the cost was incurred and for which
reimbursement is claimed.
(m) INDIRECT COSTS - OVERHEAD - Identify the cost base, indirect
cost rate, and amount billed for each indirect cost category.
(n) FIXED-FEE EARNED - If the contract provides for a fixed-fee,
it must be claimed as provided for by the contract. Cite the
formula or method of computation.
(o) TOTAL AMOUNTS CLAIMED - Insert the total amounts claimed for
the current and cumulative periods.
(p) ADJUSTMENTS - This includes amounts conceded by the contractor,
outstanding suspensions, and disapprovals subject to appeal.
(q) GRAND TOTALS
THE CONTRACTING OFFICER MAY REQUIRE THE CONTRACTOR TO SUBMIT DETAILED SUPPORT
FOR COSTS CLAIMED ON ONE OR MORE INTERIM INVOICES/FINANCING REQUESTS.
3
<PAGE> 59
SAMPLE INVOICE/FINANCING REQUEST
<TABLE>
<S> <C>
(a) Payor's Name and Address (b) Invoice/Financing Request No.
NATIONAL INSTITUTES OF HEALTH
Division of Financial Management --------------------------------
Contracts Section, FAAB
Building 31, Room B1B05A --------------------------------
Bethesda, Maryland 20892 (c) Date Invoice Prepared
--------------------------------
(e) Payee's Name and Address (d) Contract No. and Date
ABC CORPORATION
100 Main Street --------------------------------
Anywhere, U.S.A. zip code (f) Total Estimated Cost of Contract
--------------------------------
(g) Total Fixed Fee
Attention: Name, Title, and Phone
Number of Official to
Whom Payment is Sent
</TABLE>
- - -------------------------------------------------------------------------------
(h) This invoice/financing request represents reimbursable costs from
August 1, 1982 through August 31, 1982.
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(i) Amount Billed (j) Cumulative
for Current Amount From
Period Inception to
Date of this
Billing
--------------------- ------------------
<S> <C> <C> <C>
(k) Direct Costs
(1) Direct Labor
(2) Fringe Benefits $ 3,400 $ 6,800
(3) Accountable Personal Property 600 1,200
(Attach Form HHS-565)
Permanent Research 3,000 8,000
General Purpose 2,000
(4) Materials and Supplies 2,000 4,000
(5) Premium Pay
(6) Consultent Fee - 100 150
Dr. Jones 1 day @ 100 (COA #3)
(7) Travel (Domestic) 100 100
(Foreign) 200 200
(8) Subcontract Costs 200 200
(9) Other -0- -0-
Total Direct Costs -0- -0-
------- -------
11,600 20,650
(l) Cost of Money (Factor) of (appropriate Base) 2.400 3.600
(m) Indirect Costs -- Overhead
_____% of Direct Labor or Other Base (Formula) 4,000 6.000
(n) Fixed-Fee Earned (Formula)
700 1.400
(o) Total Amount Claimed $18,700 $31,650
(p) Adjustments
Outstanding Suspensions (1,700)
------- -------
(q) Grand Totals $18,700 $29,950
</TABLE>
" I certify that all payments requested are for appropriate purposes and in
accordance with the contract."
- - ----------------------------------- ----------------------------------
Name of Official Title
4
<PAGE> 60
Attachment J.1.e
This clause is for use in all cost-reimbursement RFP's and contracts. The
clause will be modified for use in fixed-price contracts.
PROCUREMENT OF CERTAIN EQUIPMENT
Notwithstanding any other clause in this contract, the contractor will not be
reimbursed for the purchase, lease, or rental of any item of equipment listed
in the following Federal Supply Groups, regardless of the dollar value, without
the prior written approval of the contracting officer.
67 - Photographic Equipment
69 - Training Aids and Devices
70 - General Purpose ADP Equipment, Software, Supplies and Support
(Excluding 7045-ADP Supplies and Support Equipment.)
71 - Furniture
72 - Household and Commercial Furnishings and Appliances
74 - Office Machines and Visible Record Equipment
77 - Musical Instruments, Phonographs, and Home-type Radios
78 - Recreational and Athletic Equipment
When equipment in these Federal Supply Groups is requested by the contractor
and determined essential by the contracting officer, the Government will
endeavor to fulfill the requirement with equipment available from its excess
personal property sources, provided the request is made under a
cost-reimbursement contract. Extension or renewals of approved existing leases
or rentals for equipment in these Federal Supply Groups are excluded from the
provisions of this article.
<PAGE> 61
Attachment J.1.f
Schedule II-A
GOVERNMENT FURNISHED PROPERTY
(Ref. Section G.7)
The following government property will be transferred from contract number
NO1-HD-1-3130 to be used on this project.
<TABLE>
<CAPTION>
Quantity Description
<S> <C>
1 Beckman Gamma Counter, 60 Hz, with printer
1 Beckman centrifuge
1 Beckman rotor (Rack Instrument) J6B
1 Beckman Refrigerator Accessory J6B
1 Beckman Liquid Scintillation Counter
1 Beckman Random Coincidence Monitor LS7000
1 Beckman Liquid Scintillation Counter with printer
1 Beckman External Standardization LS1800
1 Beckman Two-Phase Monitor LS1800
1 Beckman Multi-use Accessory LS1800
1 Beckman Sample Changer LS 1800
1 Beckman Refrigerated Centrifuge with rotor
1 SUN Laser Printer
1 SUN 141 MB Disk Subsystem
1 SUN 3/60 Desktop Workstation
1 SUN B & W Monitor
8 Cages, rabbit, stainless steel
1 Nikon Labophot-2 Microscope
1 Bockel Industries Economy Incubator
1 LabLine Titer Plate Shaker
1 Brinkman 8-channel Pipettor
1 Lab. Counter Differential Counter
1 Dynatech Microplate Reader with printer
1 Dynatech Handiwash Plate Washer
1 Packard Instruments Automatic Gamma Counter
19 Cages, primate, mobile
52 Adult male and female rhesus monkeys
</TABLE>
<PAGE> 62
NO1-HD-6-3259 Section K
PART IV - REPRESENTATIONS AND INSTRUCTIONS
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER
STATEMENTS OF OFFERORS
-------------------------------------------------------
K.1 REPRESENTATIONS AND CERTIFICATIONS (NIH 3115) (JUN 1986)
The following document(s) are incorporated by reference in this
contract.
1. The Representations, Certifications and other Statements of
Offerors dated December 6, 1995 and submitted in anticipation of contract award
by the contractor are hereby incorporated by reference into this contract.
K-1
<PAGE> 1
(21) List of Subsidiaries
<PAGE> 2
List of Subsidiaries
1. BIOQUAL, Inc.
9600 Medical Center Dr.
Rockville, Maryland 20850
and
2501 Research Boulevard
Rockville, Maryland 20850
2. Enhanced Therapeutics, Inc.
9600 Medical Center Dr.
Rockville, Maryland 20850
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 218,543
<SECURITIES> 0
<RECEIVABLES> 1,580,268
<ALLOWANCES> 0
<INVENTORY> 52,755
<CURRENT-ASSETS> 1,971,998
<PP&E> 3,191,266
<DEPRECIATION> 1,920,873
<TOTAL-ASSETS> 4,230,984
<CURRENT-LIABILITIES> 639,045
<BONDS> 0
0
0
<COMMON> 96,024
<OTHER-SE> 3,027,570
<TOTAL-LIABILITY-AND-EQUITY> 4,230,984
<SALES> 0
<TOTAL-REVENUES> 8,819,965
<CGS> 0
<TOTAL-COSTS> 8,662,583
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49,602
<INCOME-PRETAX> 117,498
<INCOME-TAX> 25,300
<INCOME-CONTINUING> 92,198
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 92,198
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
